Published On: Mon, Nov 13th, 2017

Consumer prices go up by 0.65 % and annual inflation climbs to 11.20 percent in Sept 2017




Consumer prices go up by 0.65 % and annual inflation climbs to 11.20 percent in Sept 2017

As reported by CBT (Central Bank of Turkey) annual inflation is above 10 percent currently which is something the administration would not be very happy about. In fact, it is also stated by the bank that current elevated levels of inflation and the developments on core inflation outlook continue to pose risks on the pricing behavior.

Inflation Developments

In September, consumer prices were up 0.65 percent and annual inflation rose by 0.52 points to 11.20 percent. Annual inflation recorded a decline in the energy group due to the base effect, but increased in other subgroups. Food inflation increased due to the negative base effect in the unprocessed food group coupled with the spike in the processed food prices. Core goods and services groups witnessed overall price hikes, while the rise in the clothing group is mainly attributed to the methodological change in the weighting system. These developments pushed both the annual inflation and the underlying trend of core indicators higher.



Annual inflation in food and nonalcoholic beverages increased by 0.53 points to 12.50 percent in September. Both unprocessed and processed food prices recorded higher annual inflation rates. While this outlook on unprocessed food inflation was triggered by the base effect, the red meat prices are decreasing amid the measures in effect and seasonally-adjusted unprocessed food prices have been on the decline for the last three months. Leading indicators for October hint at a sustained downtrend in unprocessed food prices. On the energy front, prices jumped in September amid price developments in oil and other inputs, and this trend continued in October.

Prices of services rose by 1.04 percent and the annual services inflation reached 9.55 percent in September. Price hikes spread across subgroups, and particularly striking were those in accommodation services and rent. Largely indexed to headline inflation, prices of educational services increased at a high rate in September as in August. Climbing inflation in services was driven both by increased costs and indexation to past inflation besides the robust course of economic activity.

Annual core goods inflation increased by 1.62 points to 12.70 percent in September. All subgroups, chiefly the clothing group saw higher annual inflation in this period. The recent upward course of core goods inflation was led by the lagged effects of the exchange rate, the strong course of economic activity and the clothing-driven methodological effects. The change in the weighting structure in clothing was mostly manifested itself in this period and accounted for nearly half of the rise in annual inflation in core indicators. Among durable goods, price hikes were more prevalent in automobiles and home appliances, and monthly price increases in core goods excluding clothing and durable goods gained momentum. Indicators for October hint at an ongoing uptrend in core goods inflation. The termination of the temporary tax reductions in white goods and furniture sector will also have a role in this uptrend. In addition, the weight update for clothing prices may still put upward pressure in October, albeit to a lesser degree.

In sum, current elevated levels of inflation and the developments on core inflation outlook continue to pose risks on the pricing behavior.

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