Meanwhile, the producers price index (PPI) rose by 2.56 percent monthly, the highest figure since the second half of 2006 when inflation first started deviating from the target after a disinflation program was started in 2002.Annual CPI jumped to 9.1 percent from 8.2 percent and the PPI to 8.15 percent from 6.44 percent in January. In the current situation, one might say that the annual inflation target of 4 percent was already a lost cause in the first few months of this year. Also, under current conditions the interest rate cuts by the Central Bank of Turkey may be paused.
When we look at the subcategories of data, it seems that adverse weather conditions in February impacted harvests and therefore food prices negatively affected the CPI, which rose by 5.05 percent in February, adding some 1.54 percentage points to headline inflation. In addition, annual food inflation jumped to 12.93 percent.
Other categories of CPI were not surprising or above expectations. For instance, prices of apparel fell by 6.93 percent monthly, pulling the headline CPI down by 0.59 percent. The average price drop in the apparel sector in the first two months of the year was 8.6 percent, much more than in previous years.
In particular, the housing and service sector, which have been two of the static inflationary categories, in general continue to present a threat (see table below). Inflation in the services sector is one of the top considerations of the central bank in dealing with inflation and deciding on interest rate cuts.
On the production side, the pressure of stagflation is highly evident while industrial prices also posted a significant increase in February. Manufacturing prices posted the highest monthly increase since June of 2006, and therefore annual PPI rose to its highest level since April of 2007. In the sub sectors of manufacturing, high petroleum and basic metals prices were the main inflation factors. With the PPI accelerating since November, the cost-push factors might start creating pressure on the CPI in the period ahead. This should be seen as a critical trend in dealing with CPI.
The story told by the core indicators, however, is different than what the headline tells us. When the unprocessed food prices are excluded, the monthly CPI is limited to 0.12 percent.
Although the significant impact of supply side factors is quite evident by looking at H-type indicators, the narrowest category (6.50 percent annually and 7.46 for the last 12 months), the central bank might again maintain its position that disinflation is continuing.
However, market perceptions are not expected to be so positive on the latest inflation data.
Benzer Haberler 
