Energy price hikes in early April are being held responsible for the high inflation. The ruling Justice and Develop-ment Party (AK Party) government announced 18.72 percent and 9.26 percent increases in natural gas and electricity prices, respectively, on April 1. Observers have warned the energy price hikes would drive inflation higher in April. A similar increase was experienced in November of last year when the base effect from hikes in the previous month of the private consumption tax (ÖTV) on certain products pushed inflation closer to double digits. The government cited surging oil prices in global markets for energy price hikes, which received harsh criticism from several circles. The price of natural gas in Turkey is determined in line with global oil markets. A heavy dependency on natural gas plants for electricity generation is another problem placing an extra burden on consumers. The Turkish lira's stubborn weakness against major currencies remains one critical fact, weakening authorities' ability to stem the rise in inflation. The April figures are the highest since October 2008. Turkey's producer price index (PPI) also increased by a slight 0.08 percent in April over March. The annual PPI stood at 7.65 percent in April. In their April Survey of Expectations, the Turkish Central Bank said the monthly inflation increase this month would be 0.95 percent. The same survey estimated the year-end annual inflation at 7.61 percent. Market experts cited price hikes introduced earlier on electricity and natural gas as the major factors driving a surge in the annual inflation.
The highest monthly increase in consumer prices in April was seen in the ready-to-wear sector, with 13.2 percent. Compared with the same month of the previous year, April’s consumer prices saw the highest increase, with 18.5 percent in alcoholic beverages and tobacco. In April, compared to the same month in 2011, the price of services jumped 6.56 percent, while prices in housing, ready-to-wear and food saw 13.1, 11.66 and 11.65 percent rises respectively. The highest monthly increase in the PPI in April was recorded as 4.39 percent in crude and natural gas. The PPI increased 2.56 percent in mining and 0.18 percent in manufacturing.
The product which saw the highest price increase -- also referred to as the inflation champion -- was tomatoes, with a 44.06 percent hike in April over March. High inflation is basically a natural result of high growth fueled by high domestic demand. Add to this such extra upward pressures as high energy prices, and Turkey may find it harder than anticipated to contain high inflation levels. Likewise, some market experts have pointed out that Turkish markets traditionally hover at relatively high levels of inflation 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. Evaluating the developments, Finansbank chief economist İnan Demir has said a decline in inflation is likely starting from May. According to Demir, the central bank could be expected to tighten monetary discipline in the short run. Possible further increases in energy input costs, along with expected increases in taxes throughout the year, might make things harder than predicted. In April 2012, of the average prices of 444 items, the average prices of 85 items remained unchanged, while the average prices of 263 items increased and the average prices of 96 items decreased. Central Bank Governor Erdem Başçı said last week the country’s inflation would decrease in the second half of 2012, and that the pace of decline would peak in the final quarter. The bank has opted for monetary tightening to stem the rise in inflation and is now hopeful that its measures will yield a visible outcome in the second half of the year. The government’s Medium-term Economic Program (OVP) has estimated Turkey’s consumer inflation to be around 5 percent by the end of the year. This, however, was too optimistic for some observers.
Economists have said the OVP year-end inflation may have to be revised, citing upward pressure from surging oil prices in global markets and a still-high domestic demand. Brent crude for a June delivery fell 55 cents to $117.65 per barrel, and US crude eased 50 cents to $104.72 a barrel on Thursday. The next months will determine whether a much-argued “hard landing” for the fastest-growing economy in all of Europe and within the larger Organization for Economic Cooperation and Development (OECD) will happen this year. Meanwhile, the eurozone’s annual inflation fell only slightly, to 2.6 percent in April.
Turkish consumers entered 2012 to find the highest peak in inflation in the last three years. The CPI hit 10.6 percent in January. It was the highest CPI Turkey had seen since November 2008. Turkey experienced a steep rise in inflation amidst large economic growth. Having remained below 5 percent in the first quarter of last year, Turkey’s inflation began to rise sharply in the second quarter.
Meanwhile, core inflation, excluding energy, unprocessed food, alcoholic beverages, tobacco and gold -- some of the major drivers of high inflation -- increased by 0.33 percent in April over March, to 8.24 percent.
95-octane unleaded gasoline sees Kr 10 price drop
Meanwhile, the price of a liter of 95-octane unleaded gasoline was decreased by Kr 10 by the government. The price of 95-octane unleaded gasoline has decreased to TL 4.48 from TL 4.58 in the latest decline. The price drop went into effect on Thursday. This follows a Kr 12 drop on 95-octane on April 20. The government has been conducting market research trying to find out how the heavy oil price burden on Turkish consumers could be eased. Consumer unions have criticized some private oil dealers in Turkey for arbitrarily increasing the price of gas at the pump. The EPDK had earlier commenced an investigation to determine the source of alleged problems in the market. İstanbul Today’s Zaman