TCMB announced: Inflation decreased in main groups

The Central Bank of the Republic of Turkey has published the May Price Developments Report. According to the report, annual inflation declined in all main groups, with a limited effect on core goods. The groups that drew attention on a monthly basis were food, which exhibited a decrease in price, and services, whose price increases slowed down. In May, the decrease in food group prices was driven by the unprocessed food subgroup, while the price increase in processed food weakened. Despite the continuation of the negative outlook in fruit prices, unprocessed food prices declined led by vegetables and some other unprocessed food items. In the monthly inflation of the energy group, the increase in mains water prices, as well as the hanging effect of the regulation made in April in electricity and residential tariffs, were decisive. The effect of exchange rate developments continued to be felt on core goods prices, especially durable consumer goods, albeit at a weakening rate. In the clothing and footwear subgroup, prices increased due to the ongoing seasonal transition, but the price increase was lower compared to the same period of the previous year. While the monthly price increase slowed down in the services group, this development was observed across all subgroups except rent. While monthly producer prices showed a relatively strong increase led by the energy group, annual producer inflation increased by 0.63 points to 23.13 percent. Under this outlook, all main trend indicators decreased in May compared to the previous month. When the main trend was examined with three-month moving averages, it was observed that the gradual slowdown trend continued. According to the report, the annual change rates of the B and C indices decreased by 2.00 and 1.75 points, respectively, to 34.81 percent and 35.37 percent. When the contributions to annual consumer inflation were examined, the contribution of the core goods group did not change compared to the previous month, while the contributions of the food and non-alcoholic beverages, services, energy and alcohol-tobacco-gold groups decreased by 0.95, 0.95, 0.36 and 0.19 points, respectively. With seasonally adjusted data, the monthly increase in consumer prices slowed down compared to the previous month. Monthly increases decreased in B and C indicators compared to the previous month. While it was observed that price increases weakened in all groups constituting the B index, indicators monitored by the TCMB pointed to a significant decrease in the main trend of inflation in May on a monthly basis and a gradual slowdown on a three-month average basis. SERVICE PRICE INCREASE SLOWED DOWN While service price increases slowed down in May compared to the previous month by 1.74 percent, annual inflation in the service group decreased by 3.41 points to 51.19 percent. While annual inflation increased in transportation, it decreased in other subgroups. The rent subgroup stood out in price increases on a monthly basis, while a moderate course was observed in other subgroups. In May, the rent increase decreased slightly compared to the previous month and was realized as 3.10 percent, while the group annual inflation decreased by 4.25 points to 84.94 percent. Restaurant and hotel prices, which are highly sensitive to demand conditions, exchange rate developments and food prices, especially red meat, showed a relatively limited increase of 1.83 percent in May after the acceleration observed in April. While the price increase in the other services sub-group slowed down to 1.39 percent, education services prices increased at a considerably low rate of 1.19 percent compared to the same period last year. On the other hand, the maintenance and repair item of personal transportation vehicles stood out with its contribution to the sub-group inflation. While transportation services prices increased by 0.99 percent, the moderate course observed in the monthly inflation of the communication group for the last two months was maintained in this period with a price decrease of -0.14 percent. In May, prices of the core goods group increased by 3.26 percent due to the developments in the Turkish lira, while the group's annual inflation decreased by 0.26 points to 20.02 percent. While annual inflation decreased in the clothing and footwear and other core goods subgroups, it increased in the durable goods subgroup. Although the price increase in durable consumer goods lost some strength compared to the previous month, it was relatively high at 2.73 percent. The effect of the price increases in automobiles (4.87 percent increase) and white goods (2.46 percent), which have high exchange rate pass-through, was observed in this development. While furniture prices were moderate in this period, price decreases were recorded in the consumer electronics subgroup. The effect of the ongoing seasonal transition was observed in the price increase in the clothing and footwear subgroup (7.09 percent), but the price increase was more limited compared to the previous year. In other basic goods, monthly inflation weakened compared to the previous month at 1.49 percent. While energy prices increased by 2.15 percent in May, the group's annual inflation decreased by 3.90 points to 44.21 percent. During the period in question, a high increase was observed in mains water tariffs (7.14 percent), while electricity prices increased by 2.40 percent due to the effect of the regulation implemented last month, which continued into this month. Fuel prices remained almost flat during this period due to the decline in oil prices due to global developments. In May, food and non-alcoholic beverages group prices fell by 0.71 percent, while annual inflation in this group decreased by 3.22 points to 32.87 percent. Annual inflation in the unprocessed and processed food subgroups decreased by 3.53 and 3.14 points to 33.53 and 32.21 percent, respectively. Unprocessed food prices decreased by 3.01 percent in May. While price decreases in vegetables (-18.58 percent), eggs (-18.81 percent) and white meat (-4.39 percent) were the determining factors in this development, the ongoing price increase in fresh fruit (8.26 percent) continued in May. Although the monthly inflation in the processed food subgroup weakened compared to the previous month at 1.39 percent, the price increase in processed meat products (7.79 percent) drew attention in terms of sub-items. While domestic producer prices increased by 2.48 percent in May, annual inflation increased by 0.63 points to 23.13 percent. In this period, in terms of main industry groups; the price increase in the energy group stood out with 7.98 percent, while price increases in capital goods, intermediate goods, non-durable and durable consumer goods groups were 2.38 percent, 1.92 percent, 1.70 percent and 0.05 percent, respectively. When monthly price developments were examined on a sectoral basis; electricity, gas, steam air conditioning, water and water treatment and distribution, metal ores, beverages, paper and paper products, motor land vehicles and wood and cork products were the sub-groups that stood out with price increases.