Turkish annual inflation slows from 15-year high after tax cuts
Turkey’s consumer price inflation slowed in November from a 15-year high, beating economists’ expectations, after the government slashed taxes and urged firms to cut prices.
The annual inflation rate fell to 21.6 percent from 25.2 percent in October, the Turkish Statistical Institute in Ankara said on Monday. Inflation was expected at 23.5 percent, according to the average estimate in a survey of 16 economists by state-run Anadolu news agency.
Inflation in Turkey has begun to slow as a downturn in the economy strengthens, and after the Turkish authorities raised interest rates and cut taxes on a range of goods including cars, household appliances and real estate. Inflation had surged to the highest level since 2003 in October after the lira slumped to a record low against the dollar in mid-August, losses sparked by an overheating economy, central bank inaction and a political crisis with the United States.
"It shows the impact of recessionary conditions plus new found strength and stability of the lira," Tim Ash, senior emerging markets strategist at Blue Bay Asset Management in London, said via e-mail in response to the November data. " It’s amazing what a bit of orthodox policy does - shame the authorities left it so late."
Inflation fell 1.44 percent in November on a month-on-month basis, the biggest negative reading since a financial crisis in 2001, with the largest decline observed in transport inflation, which dropped 6.46 percent, and furnishing and household equipment, which decreased 2.85 percent.
The lira rose more than 1.5 percent against the dollar after the inflation data was published at 10 a.m. local time. It later reversed those gains to trade down 0.9 percent at 5.26 at 4:42 p.m. in Istanbul. Losses this year total almost 30 percent. The currency had reached a record low of 7.22 per dollar in mid-August, raising fears for a full-blown economic crisis.
Annual producer price inflation slowed to 38.5 percent from 45 percent In October, the institute said.
The lira slid in afternoon trading after the price of oil rose 4.6 percent to $53.3 per barrel. Turkey imports nearly all the oil it consumes, therefore inflation is very senstive to changes in energy prices, which have slid over the past month.
Turkish economic activity is still depressed despite government attempts to stimulate demand and reduce inflationary pressures. A key measure declined for the eighth consecutive month in November -- the Purchasing Managers' Index (PMI) was 44.7 compared with 44.3 in October, according to data published by IHS Markit and the Istanbul Chamber of Industry, A reading below 50 points indicates a decline in activity.
“While the worst of the current slowdown may be over, business conditions remain challenging and there is still some way to go before a return to growth is signalled," said Andrew Harker, an associate director at IHS Markit.
(Updates story with analyst comments in the fourth and last paragraphs.)