Inflation returns to single-digit level in March

According to the TurkStat report, the consumer price index (CPI) increased by 0.58 percent in the third month of the year over February, putting annual inflation at 9.56 percent. The Central Bank of Turkey had earlier predicted inflation would return to single digits in March because of an anticipated decrease in unprocessed food prices but did not anticipate seeing a major drop in inflation until the end of the year primarily due to the base effect expected to persist through 2010. The bank foresaw inflation falling to targeted levels in the first months of 2011.

Assessing the inflation figures, business circles were cautious, attributing the rise to seasonal effects. Aynur Bektaş, head of the Women Entrepreneurs Committee of the Turkish Union of Chambers and Commodity Exchanges (TOBB), speaking to the Cihan news agency, said the figures did not surprise them. She also emphasized the positive impact of the central bank’s policy rate strategy on inflation rates. Abdülkadir Konukoğlu, CEO of Sanko Holding, said he finds the current rates positive but stressed the need to be cautious, predicting that inflation may be down in the summer.

Erdoğan Alkin from İstanbul Commerce University told the Anka news agency that the inflation rate is unlikely to remain in the single digits due to an anticipated growth in demand and seasonal factors. “It is more likely that it will increase further in the coming months and enter the double digits, but I don’t expect it to reach incredible levels either. It will be possible to see inflation returning to single-digit levels again following the fall months,” he opined.

Nurhan Toğuç, the chief economist at Ata Yatırım, said the inflation figures are in line with expectations, following a 6 percent growth announced recently for the last quarter of 2009. The Turkish economy grew 6 percent in the fourth quarter despite a year-on-year contraction of 4.7 percent. Markets are likely to continue their upward movement after these positive figures, she said, adding that bank balance sheets are also expected to be better than ever before. She added that the central bank is likely to start rate hikes in June.

The greatest monthly increase in the CPI in March was seen in communication prices with a 3.14 percent month-on-month increase, while the prices of hotels, cafes and restaurants rose by 0.98 percent over February. The highest annual increase in CPI was seen in alcoholic beverages and tobacco, transportation and food and non-alcoholic beverages, with 43.03 percent, 12.72 percent and 11.21 percent annual increases in prices, respectively. The March index took into consideration the average price of 446 items; of these, the average price of 75 items remained unchanged, while the average price of 246 items increased and that of 125 items decreased.

Express mail service experienced the highest monthly increase in price last month, with a 37.50 percent rise over February. Cauliflower came in second with an increase of 35.3 percent, followed by onions at 15.55 percent. When removing seasonal goods from the basket, the monthly rise in CPI was 0.68 percent in March, down from 0.96 percent in February. The increase in inflation was 0.52 percent, should unprocessed food be included, while it is 0.59 percent without energy products.

PPI exceeds 8 pct after 13 months

The TurkStat survey revealed that the producer price index (PPI) rose by 1.94 percent in March over the preceding month, while increasing by 8.58 percent on an annual basis. The index exceeded 8 percent for the first time since February of last year. The increase in PPI on a monthly basis was 2.79 percent in the agricultural sector and 1.76 percent in the industrial sector. The largest annual increase in prices was experienced by the agricultural sector, with a 22.72 percent annual rise in producers’ prices. Prices increased by 5.69 percent in the industrial sector in March compared to the same month last year. The subsector which saw the largest monthly increase in prices was the basic metals industry, with a 9.73 percent month-on-month increase in March. The coke and refined petroleum goods subsector saw the second-biggest hike in prices with a 4.49 percent increase. Prices fell, however, by 8.19 percent in the office machinery sector.