Central Bank releases June inflation assessment

The Central Bank of the Republic of Türkiye (CBRT) has published its "Monthly Price Developments" report.

The report is as follows:

"Consumer prices rose by 1.64 percent in June, and annual inflation fell by 3.85 points to 71.60 percent. Annual inflation declined across all groups, with the exception of a limited increase in the services group. While the monthly price increase in the services group weakened compared to the previous month, it maintained its relatively high course. Monthly price increases slowed in the rent and restaurant-hotel sub-groups, while they strengthened in transport and communication services. Durable goods prices declined in June after a long interval, due to the moderate course of the exchange rate, domestic demand developments, and discount campaigns in automobiles. The monthly price increase in the food group was close to that of the previous month. During this period, the bread and cereals sub-group stood out with price increases in the processed food sub-group. In the unprocessed food sub-group, seasonally adjusted data indicated a significant increase in fresh fruit and vegetable prices. On the other hand, red meat prices, which had shown a significant upward trend in recent months, decreased in June. In the energy group, while fuel discounts were observed, tap water prices were the determining factor in the price increase. The monthly increase in producer prices continued to weaken, and annual producer inflation declined significantly, partly due to the high base effect. Under these conditions, with seasonally adjusted data, the monthly growth rates of the B and C indicators weakened, and the annual inflation of these indicators declined.

In June, consumer prices rose by 1.64 percent, and annual inflation decreased by 3.85 points to 71.60 percent. While the annual rate of change for the B index decreased by 2.59 points to 70.40 percent, the annual rate of change for the C index fell by 3.57 points to 71.41 percent.

When examining the contributions to the decline in annual consumer inflation compared to the previous month, the contributions of the core goods, food, alcohol-tobacco-gold, energy, and services groups decreased by 1.72, 0.75, 0.52, 0.47, and 0.39 points, respectively, in June.

In seasonally adjusted data, the monthly increases in the CPI and the B and C indicators declined compared to the previous month. While the slowdown was widespread across the groups forming the B index, it was more pronounced in the core goods group.

ANNUAL INFLATION IN TRANSPORT AT 103 PERCENT

Service prices increased by 3.31 percent in June, and the group's annual inflation fell by 0.66 points to 95.27 percent. While annual inflation rose in transport and communication services, it decreased in other sub-groups. On a monthly basis, price increases weakened in the rent and restaurant-hotel sub-groups, while they gained strength in transport and communication services. In June, the monthly increase in rent slowed to 5.09 percent, while annual inflation fell by 1.50 points to 123.64 percent. With the recent partial weakening in the increase in food prices, the monthly inflation of the restaurant-hotel sub-group decreased to 3.09 percent compared to the previous month. In the other services sub-group, education services stood out with relatively high price increases, while maintenance and repair and insurance services stood out with price decreases. On the other hand, price increases in transport services (4.53 percent) gained strength in June, partly due to the holiday, thus annual inflation rose by 4.44 points to reach 103.54 percent. In the sub-group's monthly inflation, in addition to intercity road passenger transport (12.71 percent), increases in urban passenger transport tariffs were decisive. While communication services prices rose by 4.20 percent, the significant increase in postal service prices, as well as mobile phone and internet fees, drew attention.

In June, the annual inflation of the core goods group fell by 5.89 points to 50.62 percent. On a sub-group basis, annual inflation declined in the durable goods (excluding gold) and clothing and footwear groups, and remained near flat in the other goods group (Chart 6). Seasonally adjusted data indicated a significant slowdown in core goods inflation this month. Durable goods (excluding gold) prices showed a decline (0.50 percent) for the first time since August 2021, reflecting the moderate course of the exchange rate and the outlook for domestic demand in the recent period, and the group's annual inflation fell by 10.54 points to 46.89 percent. During this period, prices increased in furniture (1.95 percent) and white goods (1.30 percent), while they decreased in automobiles (0.92 percent) and electrical and non-electrical household appliances other than white goods (1.99 percent). Contrary to its historical trend in recent years, clothing and footwear group prices fell by a limited rate of 0.68 percent, while the sub-group's annual inflation decreased by 3.03 points to 46.87 percent. The price increase in the other core goods sub-group continued its slowing trend at 1.70 percent.

Energy prices increased by 1.43 percent in June, and the group's annual inflation fell by 5.10 points to 84.58 percent. While fuel prices decreased by 2.32 percent due to developments in international processed petroleum product prices, cylinder gas prices decreased by 1.10 percent. The 12.69 percent monthly increase recorded in tap water prices, largely based on developments in Istanbul, was the main determinant of energy inflation.

Food and non-alcoholic beverage group prices increased by 1.78 percent in June, and annual inflation fell by 2.06 points to 68.08 percent. While annual inflation in unprocessed food fell by 6.03 points, it recorded an increase of 1.39 points in processed food. With seasonally adjusted data, fresh fruit and vegetable prices recorded a high increase in June, more pronounced in vegetable prices. In the other unprocessed food group, it was observed that the ongoing increases in red meat prices gave way to a decline, and similarly, poultry meat prices also decreased during this period. The decline in egg prices continued in June. Thus, the monthly price increase in unprocessed food was 0.79 percent. While monthly inflation in processed food slowed to 2.71 percent compared to the previous month, the price increase in the bread-cereals item (4.64 percent) was significant, led by bread prices.

Domestic producer prices increased by 1.38 percent in June, and annual inflation fell by 7.59 points to 50.09 percent, partly due to the low base effect. When examined by main industrial groups, energy prices stood out with an increase of 2.22 percent, while it was observed that monthly price increases in the remaining groups, especially intermediate goods, followed a more moderate course. When monthly price developments are examined on a sectoral basis, coal and lignite, beverages, water and water treatment and distillation, printing and recording services, leather and related products, and electricity, gas, steam, and air conditioning were the sub-groups that stood out with price increases."