Food prices key in Turkey’s skyrocketing annual inflation: Central Bank report

Food prices key in Turkey’s skyrocketing annual inflation: Central Bank report

Food prices key in Turkey’s skyrocketing annual inflation: Central Bank report The Central Bank has stated that the rise in food prices was the main factor behind the historic rise in annual inflation in March, adding that some increases were seen in furniture and home appliance prices despite “temporary tax cuts.” 

Turkey’s annual inflation hit its highest in more than nine years in March, surging to 11.29 percent as the prices of food, transportation and alcohol all showed double-digit increases, official data showed on April 3.

Consumer prices rose by 1.02 percent from the previous month, data from the Turkish Statistics Institute (TÜİK) showed, meaning that annual inflation was at its highest since October 2008.

In its latest price developments note on April 4, the Central Bank said annual food inflation was the main driver behind the rise in Turkey’s consumer price index, partly due to last year’s base effect. The delayed effect of the Turkish Lira’s depreciation also played a key role in rising main goods prices. 

While the highest monthly increase was 1.99 percent in clothing and footwear, the indices rose for food and non-alcoholic beverages by 1.93 percent. 

Annual inflation in the latter group rose to 12.5 percent with a 3.8 percent year-on-year increase, said the Central Bank report. 

“A rise in non-proceeded food prices, mainly in fresh fruit and vegetable prices, and a lower base effect played a key role here. Significant increases were also seen in red meat and white meat, as well as in rice and legumes,” added the report. 

The Central Bank said cost-push pressures and the volatility in food prices in recent months led to a sharp increase in inflation. The sharp rise in inflation is expected to continue in the short term due to lagged pass-through and the base effect in unprocessed food prices.

The Turkish government last year reformed its food committee, which monitors price rises and is designed to prevent an “unfair rise” in food inflation. 

Deputy Prime Minister Mehmet Şimşek in March pledged that the committee, headed by himself, had begun to take steps to work on the rising cost of fruits and vegetables. 

Şimşek also said the high rate of food inflation and the extreme volatility in food prices affected the overall inflation outlook and predictability.

Huge differences in producer, consumer prices

Meanwhile, there continues to be a significant difference between food producer and consumer prices.
According to the latest price report by Turkish Industrialists Association (TZOB), there was a difference of up to 485.24 percent in the producer and consumer prices of apples in March. The difference was 451.11 percent in dried onions and 398.33 percent in dried apricots. 

The TZOB and government officials have repeatedly accused speculative middlemen of hiking consumer prices in this group. 

There is a similar story in meat prices, with Turkey’s Meat and Milk Board (ESK) starting to offer carcass meat at cheaper prices to butchers and delicatessens in order to ease increases in red meat prices as of March 27. 

Core inflation, which strips out volatile items including food and energy, rose to 9.5 percent in March from 8.6 percent in February. 

The highest annual increase was 21.71 percent in alcoholic beverages and tobacco through March, according to TÜİK data. It was followed by transportation with a 17.69 percent increase, health with a 13.28 percent increase, food and non-alcoholic beverages with a 12.53 percent increase and miscellaneous goods and services with a 12.51 percent increase.  

Turkey also saw a rise in furniture and home appliances prices in March despite tax cuts in these sectors, according to Central Bank data.