Central Bank: Exchange rate and demand were effective in core goods inflation

According to the Central Bank of the Republic of Turkey (CBRT) Monthly Price Developments Report, while core goods inflation increased in all subgroups, services inflation increased led by the items affected by the normalization process.

After the Turkish Statistical Institute (TUIK) announced that the Consumer Price Index (CPI) increased by 1.13 percent in June and annual inflation increased by 1.23 points to 12.62 percent, the CBRT’s June Price Developments Report was also published.

According to the report, while energy prices increased due to the recovery in international oil prices, annual food inflation followed a horizontal course. While core goods inflation increased in all subgroups, services inflation increased led by the items affected by the normalization process. Under this outlook, annual inflation and trend of indicators B and C increased. During this period, the annual change rates of B and C indices increased by 0.74 and 1.32 points, respectively, reaching 11.95 percent and 11.64 percent.

When the contributions of subgroups to annual consumer inflation were examined, the contributions of core goods, energy and services increased by 0.58, 0.45 and 0.23 points, respectively, compared to the previous month, and there was no significant change in the contribution of the food group.

An increase was observed in the trends of indicators B and C compared to 3-month averages with seasonally adjusted data. During this period, the inflation trend increased in both services and basic goods groups.

The slowdown in annual rent inflation continues

Service prices increased by 2.09 percent in June, and the group’s annual inflation increased by 0.48 points to 11.76 percent. Annual inflation increased in subgroups other than rent. The most significant increase was recorded in the transportation group. With the normalization process in transportation services, increases in flight tickets (12.39 percent) and intercity bus fares (23.52 percent) came to the fore.

In the restaurant-hotel group, which is subject to capacity limitations, prices increased in both food and beverage services and accommodation services. In the other services group, increases in the prices of training, package tours and barber and hairdresser services attracted attention. Postal services, telephone call and internet fees came to the fore in the increase in prices of communication services. The slowdown in annual rent inflation continued in this period.

Annual energy inflation reached 9.12 percent

Annual inflation in the core goods group increased by 2.13 points to 11.39 percent in June. During this period, annual inflation increased in all subgroups. Cumulative exchange rate effects, unit cost increases due to the epidemic, and the strengthening demand for some groups along with the normalization process were also effective on prices.

While durable goods group prices increased by 2.88 percent, led by automobiles, white goods and other electrical and non-electrical appliances, the change in clothing and shoe group prices was above the historical average with 1.15 percent. During this period, prices of other basic goods also increased significantly compared to the previous month.

Energy group prices increased by 2.62 percent in June. During this period, fuel oil and bottled gas prices increased by 6.59 percent and 3.58 percent, respectively, due to the recovery in international oil prices. Additionally, network water prices increased by 1.75 percent during this period. With these developments, annual energy inflation increased by 3.89 points and reached 9.12 percent.

Annual inflation continued to decline in the food group excluding fresh fruits and vegetables

Annual inflation of food and non-alcoholic beverages increased by 0.06 points to 12.93 percent in June. As a result of the seasonal decline in unprocessed food prices being more limited compared to last year, the group’s annual inflation increased to 12.29 percent. This development was driven by the increase in the annual inflation of vegetables to 21.39 percent despite the decrease in the annual inflation of fresh fruits.

While the rise in prices of pulses, nuts and rice continues in the other unprocessed food group, red meat prices, which have increased significantly in recent months, decreased in June. In the processed food group, the monthly price increase was more moderate compared to the last period (0.58 percent), while annual inflation in processed food decreased to 13.41 percent with the support of the base effect. With these developments, annual inflation in the food group excluding fresh fruits and vegetables continued its decline.

Prices of tobacco products increased by 0.92 percent in June due to the effect of the increase in the minimum fixed Special Consumption Tax in May, which extended to this period. Annual inflation increased slightly in this group.

PPI

Domestic producer prices increased by 0.69 percent in June, and annual inflation was 6.17 percent. Depending on the recent exchange rate outlook, the seasonally adjusted trend of manufacturing industry prices, excluding oil and basic metals, decreased in this period.

When analyzed by main industrial groups, annual inflation decreased in durable and non-durable consumer goods, increased in energy and capital goods groups, and remained almost horizontal in intermediate goods.

On a monthly basis, the increase in energy prices was driven by refined petroleum products and crude oil and gas manufacturing prices, depending on the outlook in international oil prices. In the capital goods group, increases in the prices of motor vehicles, parts and accessories, as well as machinery, bakery products and bakery products in non-durable consumer goods were effective.

While iron-steel and ferro alloys, textile yarn, basic chemicals and paper products stood out in the decline in prices of intermediate goods, prices of durable consumer goods declined, led by transportation vehicles not classified elsewhere. In summary, while the annual inflation of producer prices increased in June, its main trend slowed down.

Source: https://www.dunya.com/finans/haberler/mb-kaynak-mal-enflationda-kur-ve-talep-etkili-oldu-haberi-474428

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