TCMB July 2024 Inflation Report: Energy and Services Sectors Keep Price Pressure High

The Central Bank of the Republic of Turkey’s July 2024 price developments report reveals that while inflation is decelerating, price pressure in the energy and services sectors remains elevated.

Core Inflation Drivers

According to the report, consumer prices rose %1.78 in July; annual inflation stood at %31.75, a decline of 0.36 points.

■Monthly CPI: %1.78 increase

■Annual Inflation: %31.75 (down 0.36 points)

■Energy Group: %2.30 monthly rise, annual %32.86 (down 6.55 points)

■Services Group: %3.18 monthly rise, annual %39.70 (flat)

The Role of Energy and Fuel Prices

Energy price increases were driven by a %3.71 rise in fuel prices despite no automatic specific consumption tax (ÖTV) hike. Rising crude oil prices and a phased exit from the E‑sale mobile system were the main catalysts.

■Crude oil prices: On an upward trend

■Fuel prices: %3.71 increase (no ÖTV hike)

■Electricity prices: %5.75 increase (YEKDEM and SKT tariff impact)

Health and Transportation Service Price Pressure

Health services saw a %16.41 monthly increase due to the SGK examination participation fee adjustment. Transportation services reflected the surge in fuel prices.

■Health services: %16.41 monthly increase

■Transportation services: Directly affected by rising fuel costs

Stability in Food and Core Goods

Core goods prices fell %0.38, bringing the annual core goods inflation down to %16.82. Food and non‑alcoholic beverages, however, posted a %1.61 monthly increase and %37.52 annual inflation.

■Core goods: %0.38 decline (annual %16.82 inflation)

■Food prices: %1.61 monthly increase, annual %37.52

Producer Price Index (PPI) Trend Analysis

The PPI rose %1.52 month‑over‑month, while annual inflation fell to %27.83, a drop of 0.26 points.

■Monthly PPI: %1.52 increase

■Annual PPI inflation: %27.83 (down 0.26 points)

Fatih Kılıç – Analysis: July’s data underscore that energy and services price pressure remains the primary driver of inflation. The rise in fuel and electricity costs signals a structural cost increase for consumers, while stability in food and core goods suggests limited short‑term inflationary risk. The upcoming quarter will be pivotal, hinging on crude oil price volatility and continued SGK reforms. Markets, especially energy‑heavy equities and foreign exchange, are likely to experience heightened volatility as a result of these dynamics.