May inflation and expectations

May inflation and expectations

May inflation data turned out to be lower than anticipated by the economists with a rate of 0.4% for WPI, 06% for CPI and 1.5% for core inflation. This positive outlook of May inflation is closely related to the harvest of this season which caused a decrease in agricultural prices. The drop in the agricultural prices and food&beverage prices has checked the increase of CPI.

May 2002 WPI & CPI compositions are stated asfollows:

%       May   Year-to-date   Annual  Annual Average
WPI             0.4        11.2      49.3    73.6 
Agriculture    -4.1        19.9      56.0    59.2
Mining          4.9        17.1      43.1    70.5
Manufacture     1.9         8.4      47.2    77.5
Utilities       0.8        10.3      51.7    94.8
CPI             0.6        11.3      46.2    61.7 
Food           -3.3         8.1      51.6    68.0
Clothing        6.4        16.7      55.0    61.3
Housing         1.7        10.0      39.7    55.5
Cons.Durables   1.2        11.9      46.1    67.7
Health          0.5        12.6      44.4    50.9
Transport       1.6        18.8      52.0    71.9
Recreational    3.8        11.5      34.6    56.7
Education       0.0         0.3      51.7    48.5
Dinining        1.9        14.3      38.3    43.1 
OtherGoods&serv 1.3        13.8      43.0    68.5
Core            1.5         7.7      47.4    76.1

Despite this positive outlook of May inflation rates the current politicical instability, the probability of early elections, the conflict within the government keep influencing the TL and currency market as well as the stock exchange. Due to the seasonal change, the foreign curreny income together with the slow down of the manufacturing, the analysist did not expect to see a peak in the foreign currency. On the other hand the illness of Ecevit, the conflict in government, the fight among the politicians that keep us from fulfilling the EU agreement procedures negatively effect the market that i sensitive to the politics. This situation creates a hike of the foreign currency and causes a decrease in the stock market. In order to achieve the aimed target of 35% of annual devaluation and the exchange rate of TL1.725.000 against US Dollar the only way to calm the market down is to take immediate measures to obtain a compromise among the politicians and determine a date for the early elections.