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Wednesday, September 03, 2008

Inflation Eases Back Slightly In Turkey In August

Both Turkish producer and consumer price inflation eased back slightly in August. The Turkish consumer price index fell 0.24 percent from July, while the producer price index was also down 2.34 percent on the month, according to data from the Turkish Statistical Institute (TURKSTAT) today. On an annual basis the Turkish CPI was running at 11.77 percent, while the PPI annual rate dropped to 14.67 percent.

The fall in the consumer price index was mainly due to reduced clothing and footwear prices, which were down 6.5 percent, as the summer sale session continues, as well as a fall of 1.55 percent in transport prices. Housing prices, on the other hand, increased by 2.12 percent in August.

The significant decrease in the monthly producer price index was mainly due to a 3.14 percent fall in prices in the manufacturing industry sector, in combination with a 2.41 percent fall in the industry sector and 1.99 percent fall in the agriculture sector.

Despite the fact that energy prices rose 5.69 percent this increase failed to push up the producer prices index. The Turkish Central Bank expects the 2008 year-end inflation rate to reach 10.6 percent, while the bank also estimates it will be somewhere in the rather large range between 5.9 and 9.3 percent in 2009, before dropping to a level of between 4 and 7.8 percent towards the end of 2010. These longer term predictions seem to me to be virtually worthless at this point, since we simply do not know what will happen to energy and food prices in 2009. The former depends to some considerable extent on the pace of output growth across the emerging economies, while the second depends to some significant extent on the weather, over neither of which factors the Turkish bank has any significant control.

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