Export Gate Inflation: Non-Domestic PPI Rises 29.67% Annually in July

The Non-Domestic Producer Price Index (ND-PPI), a critical gauge measuring the cost pressures at Turkey's export gates, continues its upward trajectory under the shadow of global demand conditions and exchange rate pass-through. According to data released by the Turkish Statistical Institute (TUIK), the ND-PPI rose by 2.51% month-on-month in July, while the annual rate of increase reached 29.67%. This print indicates that the cost inflation faced by manufacturers in foreign market pricing remains highly active.

Divergence in Industrial Sectors and Cost Dynamics

■While the annual increase in the manufacturing sector was recorded at 29.62%, the mining and quarrying sector experienced a sharper rise of 32.49%.

■On a monthly basis, the highest surge was observed in coke and refined petroleum products with a 3.15% jump.

■Across main industrial groupings, intermediate goods climbed by 26.73% annually, while capital goods registered a substantial 38.05% upward movement.

The FX-Cost Squeeze and Competitiveness Dilemma for Exporters

■Fluctuations in global commodity prices, combined with a relatively stable Lira, are squeezing margins for exporters who are already under pressure to discount prices in foreign markets.

■Although the annual producer inflation of 29.67% remains below the domestic consumer inflation path, it threatens operational profitability when coupled with slowing global demand.

Following the ND-PPI print, algorithmic trading systems (HFT) and FX forward markets showed no dramatic volatility. However, this persistent rise in foreign market costs indirectly impacts the swap market's pricing regarding the CBRT's rate-cut timeline. Currently, the swap market maintains its expectations for a first rate cut in the final quarter of the year, yet we receive signals that a potential deterioration in the trade balance could prolong the tight monetary stance. The margin squeeze on exporters may exert pressure on the growth composition in the upcoming quarters.