Turkey’s April inflation unexpectedly slows to 19.5 percent amid weak demand

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People walk in a long corridor lined by Turkish flags in a historic bazaar in the central Sultanahmet district of Istanbul on August 11, 2018. / AFP PHOTO / Yasin AKGUL

Turkey’s inflation rate unexpectedly slowed somewhat to 19.50 percent in April from a year earlier, helped by more moderate rises in transportation and clothing, even while overall prices remained lofty in the midst of a recession, Reuters reported.

Month-on-month consumer price inflation was a less-than-expected 1.69 percent, driven by a 6.77 percent leap in alcohol and tobacco prices in the wake of nationwide local elections at the end of March.

A Reuters poll had predicted annual inflation would rise 20.33 percent and monthly inflation would climb 2.4 percent. 

The slowing inflation occurred despite record gains in the cost of food, in a sign that weak domestic demand is taking a toll on prices, according to Bloomberg.

A near 30-percent slide in the lira against the dollar last year pushed inflation to a 15-year high of more than 25 percent in October. After a few months of declines, it has stalled this year at high levels and remains a major concern among investors.

A near 32 percent jump in food and non-alcoholic drinks prices kept overall annual inflation high last month.

The better than expected readings reflected “very depressed domestic demand conditions, with little pricing pressure from corporates,” said Timothy Ash of Bluebay Asset Management. 

“Some will also focus on the continued maintenance of price controls and question how accurate or realistic these inflation numbers are now,” he added.

Turkey’s central bank left its inflation forecasts unchanged at 14.6 percent for end-2019 in its quarterly inflation report this week. Last week, the bank left its key interest rate unchanged at 24 percent. 

Some brands of cigarette and tobacco products hiked prices around 20 percent in April while other brands left them unchanged after the elections.

Separately, the producer price index rose 2.98 percent month-on-month in April for an annual rise of 30.12 percent, the data from the Turkish Statistical Institute showed.

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