Turkey’s July inflation figures surprise market watchers
Turkey's both consumer price index and producer price index were lower than market expectations in July.
Turkey's State Institute of Statistics (DIE) disclosed that the country's consumer price index (CPI) fell 0.57 percent and producer price index (PPI) dropped 0.74 percent in July compared to the previous month.
Accordingly, year-on-year CPI retreated to 7.82 percent, while year-on-year PPI regressed to 4.26 percent in July.
On the PPI front, the 2.47 percent contraction in agricultural prices and 0.36 percent fall in
manufacturing sector prices drove the headline figure lower. In addition, the appreciation of the New Turkish Lira (TRY) and an increase in productivity also contributed to the decline in PPI. On the other hand, the increase in oil prices, which hinders the deflation process, affected the PPI figure negatively.
On the CPI front, oil prices continued to have a negative effect on the CPI. The 1 percent rise in the transportation and housing sectors could mainly be attributed to the higher oil prices. However, seasonal factors, coupled with the decline in food and clothing prices, pulled the CPI figure down. Furthermore, the appreciation of the TRY played an important role in CPI.
Both CPI and PPI are expected to show a similar trend in the coming month. Seasonal factors could bring food and clothing prices down significantly. As a result, CPI may retreat again in August.
Under these circumstances,
Turkey's Central Bank is expected to maintain its interest rate level.