I joined a live stream on İnfo Menkul Değerler’s YouTube channel with Mine Uzun on Tuesday night, where I said:
“..If the CPI figure released by TurkStat turns out to be like the Istanbul Chamber of Commerce Indices, the seven-month inflation will be nearly 48%. That is to say, keeping the inflation at approximately 60% at the end of the year will be a miracle.
The CPI should be between 1.5% and 2% in the remaining months before the year comes to an end so that the prediction of the Central Bank comes true.”
Apparently, someone realised the mathematical error they have made when calculating the year-end inflation projections that the CPI was announced as 2.37% before August. Now, without further arguing about the credibility of this figure, let’s take a look at the Istanbul Chamber of Commerce data, which are considered the leading indicators:
According to Istanbul Chamber of Commerce, retail prices have increased as follows in July, compared to the previous month: healthcare and personal care prices increased by 17.31%, household goods by 7.70%, food prices by 4.83%, culture, education, and entertainment spending by 4.44%, clothing by 2%, 63, and housing prices increased by 2.15%. Transportation spending decreased by 4.55%. As for the wholesale prices, raw materials increased by 6.03%, food by 5,99% and construction increased by 3.97% compared to the previous month. There was a 7.51% decline in the prices of mines, 0.97% in the fuel and energy, and 0.72% in chemical prices. These decreases are due to the seasonal effects, but it looks like the pace of monthly price hikes have not slowed down.
“The Base Effect Will Not Work As Expected”
Apparently, we can no longer rely on the base effect of inflation until the end of the year because the CPI, which hit bottom in August last year, seems to have started to climb up again in the following months. We know that inflation was extremely high in these months.
“…If the CPI is announced as 2% despite the data provided by the Istanbul Chamber of Commerce in July, I don’t think it will help improve the CDS, which is currently above the 850, let alone the controversy that will follow. Trust is the keyword here, but also a challenge. To achieve a 19.20% CPI forecasted by the Central Bank next year, we first need to ensure that the current year comes to an end without any further unexpected incident. We should not ignore that the CPI is still high due to the high exchange rates…”
I think it might be useful to look at the facts I mentioned above first, before looking at the content of the CPI figures.