Turkey: Inflation eases from near 14-year high in December
January 3, 2017
Consumer prices rose 0.69% from the previous month in December, well below the 1.49% jump recorded in the previous month and only slightly above market expectations of a 0.62% increase. Softer price pressures reflected tamer price pressures for food and non-alcoholic beverages and a decline in prices for clothing and footwear. The slight surprise, however, reflected somewhat stronger pass-through effects from the weakened lira, which were evident across multiple imported goods.
Inflation eased from 13.0% in November, the highest print in the current inflation series that began in 2003, to 11.9% in December. This was the result of a normalization in food prices and softer price increases for tobacco. However, as in the month-on-month figure, the weak lira contributed to an acceleration in core inflation from 12.2% in November to 12.3% in December, largely reflecting stronger price pressures on core goods.
Analysts had expected inflation to ease towards year end as a strong base effect kicked in. December’s reading confirms this view, while several factors suggest the headline figure could ease further in upcoming months. Food prices are expected to continue sliding following a stronger-than-expected increase in early 2017, while the government has refrained from increasing tobacco taxes this year after doing so last year. Economic activity will also provide less of a boost to prices this year as fiscal stimulus winds down.
Author: David Ampudia, Economist