Macro View: Inflation (Gedik Yatırım)

December CPI inflation at 1.18% MoM comes well below the median market expectation of 2.6% and our 2.0% estimate. TurkStat revealed December CPI inflation at 1.18%, which is somewhat lower than the 2.6% median expectation and our 2.0% estimate. With this result, year-end CPI inflation turned out to be 64.3%, down from last month’s 84.4%, as significant base effects kick in, considering the 13.6% outcome of Dec-21. Yet, the 12-month average CPI inflation continued to edge higher to 72.3% from 70.4% last month. Meanwhile, the recent stability in the TL and the easing in energy prices have also reflected into D-PPI inflation with a 0.24% MoM deceleration, also leading to a deceleration in YoY terms to 97.7% from 136.0% (157.7% in October), while the 12-month average outcome stands at 128.5 YoY.
 
The food inflation was below expectations, while the stability in TL has also favourably impacted core inflation. Food inflation was 1.9% MoM, which is a low outcome for a month like December, as mild weather has led to a 3.3% MoM decline in fruit-vegetable prices, despite a 4.0% MoM rise in processed food prices. Food inflation was actually lower than our 3.0% projection, explaining a major portion of the deviation in our headline inflation estimate. The outcome is also below the Istanbul and Ankara food inflation indicators of 3.1% and 4.4%, compiled by the Istanbul Chamber of Commerce and labour union Turk-İş. Favourable base effect has also led to a significant decline in YoY food inflation to 77.9% from 102.5%. Clothing inflation was -1.3%, which is also below our expectation of 1.5%, another major factor behind the favourable outcome. We should note that YoY clothing inflation stands at 25.8%, well below the headline CPI inflation, as well as the 109% rise in textile sector costs, as depicted from the D-PPI inflation components. Services inflation at 1.9% also came somewhat below our expectation of 2.8%% MoM, although durable goods inflation and other core goods inflation were broadly in line. As a result, core CPI inflation (group C) was 1.86%, lower than our 2.5% expectation. On a YoY basis, core inflation eased to 51.9% from last month’s 68.9%. Finally, the 10% fall in diesel and gasoline prices has led to a 2.1% MoM fall in the energy component of the inflation basket (in line with expectations), although YoY energy inflation stands at 94.4%, down from 118.0%.
 
Base effect will continue to pull down YoY inflation, although significant price adjustments will linger, particularly in services sectors. Note that the cumulative CPI inflation over the January-April period last year had reached 31.7% (a monthly average of 7.1%), following the dramatic TL sell-off. As such, although we expect significant upward price adjustments in services sectors in particular, we are likely to witness a material deceleration in YoY CPI inflation, as these figures are removed from the inflation series (assuming that there will not be a similar TL-sell-off). With the assumption of a limited TL depreciation (e.g.: USD/TL rate at 20-21 levels by mid-year), we would expect CPI inflation to decelerate to about 50% (or slightly lower) at end 1Q23, and probably to levels around 40-45% by 2Q23. Our current projection for year-end CPI inflation stands at 40.0%, which may yet be subject to various revisions in the coming months, either to the upside or downside, depending on the course of the USD/TL rate.

 
 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.