Turkey’s inflation reading was 3.0% month-on-month in April, coming in below the consensus of 3.1% (and our call at 3.2%) thanks to relatively benign unprocessed food prices. As a result, the annual inflation rate, which has been declining over the past year, fell slightly to 37.9% from 38.1% in March. However, it remains above the Central Bank of Turkey’s (CBT) forecast of 24% (with a forecast range of 19-29%). While inflation rose by 3.2% in April 2024, the five-year average for April in the 2003-based index was 3.1%, indicating no meaningful base effect this year.
PPI was 2.8% MoM driven mainly by food products, textiles and metals, while there was a drop in the annual change to 22.5% YoY vs a month ago. The 6.5% MoM and 3.9% MoM increases in the currency basket (50:50 EUR:USD) in March and April, respectively, showed an acceleration compared to previous months and signalled that the pass-through from exchange rates to prices has been more pronounced lately. However, the year-on-year lira increase remained relatively muted at less than 23%, implying that cost pressures have been contained. This has contributed to a more favourable trend in Turkish lira (TL)-denominated import prices along with benign commodity prices, given the large drop in April.
Core inflation (CPI-C) rose by 3.3% MoM, bringing the annual rate down to 37.1%. A preliminary assessment of seasonally adjusted data – set to be published by TurkStat and closely monitored by the CBT to gauge underlying trends – reveals that the acceleration in March headline and core numbers also continued in April, while the pace of increase in core was more evident.