Consumers in Turkey woke up to a white Friday, but this time to find the highest peak in inflation for the past three years replacing reports of blizzards and snow storms on the morning news. Turkey's consumer prices increased by a slight 0.56 percent in the first month of 2012 in comparison with December, bringing the annualized consumer price index (CPI) to 10.6 percent, Friday's data revealed. The earlier growth estimate for inflation in January was 0.4 percent. At 10.61 percent, January's CPI is the highest Turkey has seen since November 2008. The estimate for January's annualized inflation was lower, at 10.56 percent. The revised 2011 year-end inflation estimate is 7.2 percent, Today's Zaman reported.
The Turkish Statistics Institute (TurkStat) announced the results of their price index report on Friday.
According to the report, the CPI jumped in January by 10.6 percent in comparison to the same month of 2011, while producer prices increased by 11.13 percent in the same period. The producer price index (PPI) was 0.38 percent higher in January than December, the TurkStat data indicated. The highest increase in CPI was seen in alcoholic beverages and tobacco products, which increased by 18.53 percent in January over the same four weeks of the preceding year. The highest monthly increase in the index was 2.06 percent, for transportation. The indices rose by 1.79 percent for miscellaneous goods and services, 1.58 percent for furnishings and household equipment, 1.32 percent for housing and 1.13 percent for food. In January 2012 the average prices of 55 items remained unchanged, while 277 items increased and 112 items decreased. The "champion" of price hikes in January was cucumber, which saw a 34.5 percent increase in price per kilo over the past month.
Turkey experienced a steep rise in inflation amidst high economic growth. Having remained below 5 percent in the first quarter of this year, Turkey's inflation began to rise sharply in the second quarter. The official figure for 2011 year-end growth, which is yet to be announced, is expected to be more than 8 percent, one of the world's highest. Also underlying the soaring inflation was a depreciating Turkish lira and the outflow of short-term funds. These factors, combined with a rapid growth in domestic demand and rising oil prices, have fueled domestic prices, particularly over the past few months. Oil prices hovered above $96 a barrel on Friday. Turks are already feeling the strain of recently increased taxes, not to mention paying some of the world's most expensive prices at the gas pump.
Turkish Central Bank Governor Erdem Bascı said earlier he expects inflation to remain high during the first three months of 2012, after which it will begin to fall at the start of the second quarter. Observers pointed to the potential danger of the central bank being left with little room to maneuver if inflation stays at two-digits, combined with much lower growth rates throughout 2012. The central bank had earlier set its 2012 year-end inflation target at 5.5 percent. An expected slowdown in domestic demand following the first three quarters of 2012 has resulted in markets pinning hopes on relatively low inflation by the end of the year. Some market experts have pointed out that Turkish markets traditionally hover at relatively high levels due to seasonal influences during the first half of the year. This, they believe, would give the central bank enough room to contain the impact of rising inflation until May 2012. Possible further increases in energy input costs, along with expected increases in taxes throughout the year might make things harder than predicted. Meanwhile, core inflation, excluding energy, unprocessed food, alcoholic beverages, tobacco and gold -- some of the major drivers of high inflation -- was 8.42 percent in January, in comparison to the prediction of 8.13 percent. Core inflation was around 2.5 percent in November 2010 and has more than tripled since. Elsewhere, high energy prices, pushed even higher by Iranian supply concerns, have also made life difficult for consumers in Turkey's largest export market, the EU. Consumer price inflation in the eurozone remained at 2.7 percent for the second straight month in January, above the European Central Bank (ECB) target of below 2 percent.