According to the 2024 TurkStat inflation data, which will be a reference for public wage and pension increases, consumer prices rose by 2.93 percent month-on-month in December. Thus, annual inflation was realized as 64.77 percent. These levels were last observed in the early 2000s. CPI inflation, which rose to 68.8 percent in 1999, closed 2001 at 68.5 percent.
Market expectations were for monthly CPI inflation to increase by 3.1 percent and annual CPI inflation to reach 65 percent.
In the Central Bank’s latest Inflation Report, the year-end forecast for 2023 was 65 percent. At the last MPC meeting in 2023, the CBRT slowed down the pace of policy rate hikes, declaring that the policy rate, which rose to 42.5 percent after a 250 basis point increase, was “significantly close to the level of monetary tightness required for the establishment of disinflation” and gave the message that it would “complete the tightening steps as soon as possible”.
According to the 1995-based data of the Istanbul Chamber of Commerce (ITO), the Istanbul Wage Earners Livelihood Index, which is an indicator of retail price movements in Istanbul, increased by 3.52 percent in December compared to the previous month, while the Wholesale Price Index, which reflects wholesale price movements, increased by 2.31 percent. Thus, the annual levels were 74.88 percent in retail and 62.77 percent in wholesale prices, respectively.
High inflation in services sector continues
The main group with the lowest increase compared to the same month of the previous year was housing with 40.39 percent due to the support from natural gas bills. Housing was followed by clothing and footwear with 40.74 percent and communication with 51.02 percent.
On the other hand, the main group with the highest increase compared to the same month of the previous year was restaurants and hotels with 93.24 percent. This was followed by education with 82.06 percent and health with 79.59 percent. Food inflation was also recorded as 72.01 percent in 2023.
By main expenditure groups, the main group with the lowest increase in December 2023 compared to the previous month was clothing and footwear with -1.33%. On the other hand, the main group with the highest month-on-month increase in December 2023 was entertainment and culture with 5.30%.
Core inflation rose from 68.89 percent to 70.64 percent
In terms of core inflation, which tells the recent course of inflation, the upward trend continues.
The Core-C index (excluding energy, food and non-alcoholic beverages, alcoholic beverages, tobacco products and gold) rose by 2.31 percent in December, up from 1.96 percent in November. The 12-month level rose from 68.89 percent to 70.64 percent.
Momentum on producer price inflation weakens
On the other hand, the relative weakening trend in producer prices continues. In December, the producer price index increased by 1.14 percent compared to the previous month. Thus, producer price inflation ended 2023 with 44.22 percent.
While the decline in oil prices contributed significantly to restraining PPI inflation, it is noteworthy that inflation in prices of intermediate goods, the main input of industry, is still high at 2.54 percent month-on-month (47.7 percent year-on-year) and inflation in prices of capital goods at 2.27 percent (65.1 percent year-on-year).