Moderate Inflation Decline in Core Sectors, Energy Prices Increased
The Central Bank of the Republic of Turkiye (CBRT) has released its May Price Developments Report, highlighting that annual inflation saw a slight decrease in services and core goods while significantly rising in the energy sector and other groups.
Key Findings from the Report
According to the report, despite a notable increase in annual consumer inflation due to base effects, core indicators B and C showed a moderate trend. The annual inflation rate decreased slightly in services and core goods but increased notably in the energy sector. This increase was driven by the cessation of a policy that provided the first 25 cubic meters of natural gas for free to households, which had previously contributed to a lower inflation base.
Service and Food Sector Trends
In the service sector, high monthly price increases continued, particularly in the restaurant-hotel, rent, and education categories. Meanwhile, monthly inflation in the food group weakened due to seasonal effects, especially in unprocessed food prices like vegetables. Conversely, processed food inflation increased compared to the previous month.
Core Goods and Energy Prices
In the core goods sector, prices of clothing and footwear rose due to seasonal changes, while price increases in durable goods slowed down. The moderate trend of the Turkish lira contributed to a significant weakening in monthly producer price increases, although annual producer inflation rose due to base effects.
The energy sector saw a 4.91% increase in prices in May, with annual inflation in this group jumping 46.85 points to 89.68%. The end of the free natural gas policy for the first 25 cubic meters significantly impacted this increase. However, fuel and liquefied petroleum gas prices fell by 3.11% and 1.45%, respectively, limiting the overall rise in energy group inflation.
Detailed Sector Analysis
- Services: Service prices increased by 4.03% in May, with annual inflation dropping by 1.06 points to 95.93%. The transport services sector saw a decline in prices, while restaurant-hotel, rent, and education services experienced high monthly price increases. The rent sub-group saw a notable monthly increase of 5.46%, with annual inflation in this sub-group reaching 125.14%.
- Core Goods: Annual inflation in the core goods group decreased by 0.63 points to 56.51%. Durable goods prices (excluding gold) showed a monthly increase of 1.89%, slowing down compared to previous months. Prices of automobiles, furniture, and white goods increased by 2.99%, 2.01%, and 0.91%, respectively.
- Energy: The energy sector experienced significant inflationary pressure due to the end of the free natural gas policy. Natural gas prices surged by 28.89%, driving the group’s overall inflation up. However, declines in fuel and LPG prices helped to moderate the increase.
- Food and Non-Alcoholic Beverages: Food prices rose by 1.69% in May, with annual inflation increasing by 1.64 points to 70.14%. Unprocessed food prices, driven by seasonal effects, saw a decrease, particularly in vegetables and eggs. In contrast, processed food inflation rose significantly, influenced by cumulative increases in red meat prices and raw milk costs.
- Alcohol and Tobacco: Prices in the alcohol and tobacco group rose by 4.74% due to producer-driven factors, with annual inflation climbing by 7.95 points to 86.48%.
- Producer Prices: Domestic producer prices increased by 1.96% in May, with annual inflation rising by 2.02 points to 57.68%. Energy prices led this increase, with a notable 3.32% rise, while other categories like intermediate and capital goods saw more moderate price changes.
Conclusion
The CBRT’s May Price Developments Report indicates a complex inflationary landscape with varying trends across different sectors. While core goods and services showed signs of moderation, energy prices experienced significant inflationary pressure, driven by policy changes and seasonal factors. The report underscores the ongoing challenges in managing inflation amidst fluctuating economic conditions.
Source: Trthaber / Prepared by Irem Yildiz