Macro View: Inflation (Gedik Yatırım)

CPI inflation was 3.37% in May, leading to a rise in YoY terms to 75.4% from
69.8%. TurkStat revealed May CPI inflation as 3.37% MoM, exceeding our
3.1% estimate, which was also the median market expectation (Foreks survey).
Recall that May-23 CPI inflation had turned out to be 0.04% due to the
TurkStat’s decision to use the “zero price method” for natural gas to reflect the
subsidization of the natural gas fees ahead of the general elections last year.
This unfavourable base effect led to a steep rise in YoY terms to 75.45% from
69.80%. Core CPI (group C) inflation at 3.76% MoM (May 2023: 4.25%) very
slightly exceeded our 3.7% estimate, and fell in YoY to 75.0% from 75.8%.
Finally, the D-PPI inflation was 1.96% MoM, which was well above the April
2023 figure of 0.65%. As such, YoY PPI inflation increased further to 57.7%
from 55.7%.
In May, the moderation in food inflation fell short of our expectations, while
the rigidity in services inflation persisted. While shaping our headline CPI
inflation estimate of 3.1%, we had incorporated a moderation in monthly food
inflation to levels around 0.0% (attributable to an easing in vegetable prices).
Yet, the moderation in food inflation fell short of our expectations with a 1.7%
monthly outcome. Core CPI (group C) inflation at 3.76% was broadly in line
with our 3.70% projection. Yet, looking at its breakdown, we should note that
services inflation, which we closely monitor to analyze long-term inflation
trends, was 4.0%, somewhat above our 3.5% estimate. That said, clothing
inflation at 9.6% once again downplayed our estimate (12.0%), keeping our
core inflation estimate intact with the actual outcome. Finally, monthly inflation
in the durable goods and other core goods components, which are highly
sensitive to currency and demand developments, turned out to be 1.9% each,
broadly in line with our expectations.
There remains a distinct deviation between headline CPI inflation and the
clothing subcomponent. As we mentioned various times before, we observe
that the inflation trend in the clothing sub-category has remained significantly
below headline inflation since the end of 2021 when inflation began to escalate
(Graph 4). To quantify, we calculate that since December 2021, the cumulative
CPI inflation has been 277%, whereas clothing inflation has only been 121%.
Meanwhile, we also note that the clothing inflation derived from subcomponents of retail sector turnover and volume indices, disclosed by TurkStat,
also diverges significantly from the CPI’s clothing component (Graph 5).
The underlying monthly inflation remains inconsistent with the CBRT’s yearend inflation forecasts. The CBRT's closely monitored underlying monthly
inflation metrics (the 3-month moving average of seasonally adjusted monthly
inflation) remained above 3.0% for headline CPI inflation, and above 4.0% for
services inflation. Recall that the CBRT had previously stated that the monthly
inflation trend should decline to around 1.5% in 4Q24 to meet its end-2024 and
end-2025 CPI inflation forecasts (38% and 14%). As we had already
expressed in our GDP growth review report (published on Friday), we think
that for a sustained disinflation process beyond 2024, there should be a
sharp slowdown in GDP growth momentum to levels around 2.0% or even
lower, which is well below the current consensus GDP growth forecast of
3.5-4.0%. Yet, we should note that current growth trends, particularly the
outlook for domestic demand, do not indicate a contraction of this
magnitude

  Gedik Yatırım Menkul Değerler A.Ş.
  www.gedik.com

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                               Yasal Uyarı
 
 Burada yer alan yatırım bilgi, yorum ve tavsiyeler yatırım danışmanlığı kapsamında değildir.Yatırım danışmanlığı hizmeti ; aracı kurumlar, portföy yönetim şirketleri, mevduat kabul etmeyen bankalar ile müşteri arasında imzalanacak yatırım danışmanlığı sözleşmesi çerçevesinde sunulmaktadır.Burada yer alan yorum ve tavsiyeler, yorum ve tavsiyede bulunanların kişisel görüşlerine dayanmaktadır.Bu görüşler mali durumunuz ile risk ve getiri tercihlerinize uygun olmayabılır.Bu nedenle, sadece burada yer alan bilgilere dayanılarak yatırım kararı verilmesi beklentilerinize uygun sonuçlar doğurmayabilir.