Exchange rates pressure pushes inflation to double digits
by Daily Sabah
ISTANBULMar 07, 2017 - 12:00 am GMT+3
by Daily Sabah
Mar 07, 2017 12:00 am
According to the February 2017 Price Developments report, published by the Central Bank of the Republic of Turkey (CBRT), the effects of exchange rates observed on the inflation rate in February are mainly spreading to core goods and energy groups.
The CBRT's report indicates that consumer prices increased by 0.81 percent and annual inflation rose by 0.91 points to reach 10.13 percent in February.
The increase in the annual inflation in food continued in the same period, and despite temporary tax cuts, annual inflation and the main tendency of core inflation indicators have risen as a result of the significant increase in core goods inflation, driven by the cumulative depreciation of the Turkish lira.
Given the contributions of sub-groups to annual consumer inflation, the contribution of core goods, energy and food groups increased by 0.42, 0.30 and 0.22 points, respectively, compared to the previous month. On the other hand, there has been no significant change in the contribution of services and alcohol-tobacco groups.
Service prices increased by 0.68 percent in February, while annual inflation rose by 0.10 points to 8.37 percent. In this period, annual inflation rose in the transportation and communication group, but remained relatively flat in the other sub-groups.
Regarding the transportation services group, the upward trend in road and airline transport prices continued due to the cumulative increase in fuel prices. In the restaurant group, on the other hand, prices have declined in accommodation services and increased in food services, thus accommodation services have maintained their low level of annual inflation (0.12 percent). However, annual inflation remained high in the rent and other services group, while preschool education and primary education (12.31 percent) and health services (10.67 percent) came to the fore in other services.Annual inflation in the core goods group increased by 1.65 points to reach 8.83 percent, in February. During this period, the effects of the depreciation of the Turkish lira were seen throughout the sub-groups, and apparel prices fell significantly below the historical average. Prices of durable consumer goods rose by 4.86 percent in the automobile and 1.39 percent in the electrical and non-electric appliances group, while the furniture and white goods prices in February decreased by 4.86 percent and 1.47, respectively, with the effect of temporary tax reductions in February.
As a result of group-wide price increases, energy prices also increased by 1.52 percent in February. Tube gas, solid fuel and water prices rose by 5.08 percent, 1.78 percent and 1.61 percent, respectively, compared to the previous month. In addition, fuel prices increased by 1.97 percent in this period, to reach a cumulative increase of 27.40 percent over the last six months. As a result, the energy group's annual inflation has increased 2.34 percent to reach 13.94 percent.
Annual inflation in the food and non-alcoholic beverages group rose by 0.95 points to 8.72 percent in February, driven by the rise in unprocessed food prices in accordance with the fresh fruit group. Red meat prices maintained a moderate course during this period, while strong price increases in sub-groups such as nuts, pulses and rice were noted.
Domestic producer prices increased by 1.26 percent in February, while annual inflation rose by 1.67 points to 15.36 percent, determined by the exchange rate and international commodity prices. Annual inflation has reached 17.18 percent in the manufacturing industry and 11.92 percent in the manufacturing industry, excluding oil and base metal, while the seasonally adjusted main tendency of manufacturing industry prices, excluding oil and base metal, maintained its high level.