Turkish June CPI inflation comes in at 0.31% m/m, higher than expected.

By bne IntelliNews July 3, 2014

Consumer prices rose 0.31% m/m in June, compared with a market consensus forecast of a 0.02% decline. The CPI inflation was 0.4% m/m in May.

The annual rate of inflation eased to 9.16% in June from 9.66% in May, the statistics institute, TUIK, said on Thursday.

Food prices rose 0.36% m/m, adding 0.09 percentage points to the headline inflation while housing prices showed a 0.24% m/m rise, adding another 0.04 percentage points to inflation. Clothing prices fell 1.25% m/m, shaving 0.09 percentage points from inflation while alcoholic beverage & tobacco prices declined 0.06% m/m, making no contribution to the headline figure. Transportation costs rose 0.5% m/m in the month, adding 0.08 percentage points while education service prices increased 1.72% m/m, the highest increase among all items in the month, contributing 0.04 points to inflation. Health service prices also rose 0.98% m/m in the month, adding 0.02 percentage points and the rise in hotel & restaurant prices was 0.92% m/m and this service item’s contribution to headline inflation was 0.06 points.

The I-index, the Central Bank’s one of favourite core inflation indicators, that rose 1.5% m/m in May increased 0.31% m/m in June, for an annual rise of 9.65% (9.77% y/y in May). The I-index excludes the prices of energy, food and non-alcoholic beverages, alcoholic beverages and tobacco products and gold.

Domestic producer prices rose 0.06% m/m in June, after falling 0.52% m/m in the previous month, data from the TUIK also showed.

The Central Bank has been arguing that with the contribution of base effects, inflation will decline markedly starting from June and the tight monetary policy stance will be maintained until there is a significant improvement in the inflation outlook. The Bank’s official inflation target for 2014 is 5% but it raised its 2014 inflation forecast to 7.6% from a previous 6.6%.

On Thursday, economy minister Namik Zeybekci once again called for a rate cut. Inflation has entered a downward trend, Zeybekci said, adding that interest rates are currently not at a level that supports investment and production. The Central Bank should lower rates in line with markets’ end-year inflation expectations, Zeybekci said. End-year inflation expectations edged down to 8.29% in June from 8.33% in May, the Central Bank’s monthly expectations survey showed.

June CPI by Main Expenditure Groups (%)
  Weights m/m y/y
Headline 100 0,31 9,16
Food and non-alcoholic beverages 24,45 0,36 12,47
Alcoholic beverages and tobacco 5,29 -0,06 2,92
Clothing and footwear 7,17 -1,25 8,51
Housing, utilities 16,41 0,24 5,29
Furnishings, household equipment 7,52 0,46 9,19
Health 2,44 0,98 9,48
Transportation 15,54 0,50 12,01
Communications 4,70 0,08 0,36
Recreation and culture 3,36 0,40 5,93
Education 2,26 1,72 9,28
Hotels, cafes and restaurants 6,58 0,92 13,22
Miscellaneous goods and services 4,28 0,70 7,72
Source: tuik      

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