Turkey’s May CPI lower

ANKARA – May consumer price inflation data published yesterday showed the lowest monthly rise since a 1994 crisis sent prices soaring, boosting hopes Turkey will meet inflation goals but doing little to banish worries about growth. The State Statistics Institute said monthly CPI rose 0.6 percent in May, giving an annual rate of 46.2 percent, down from 52.7 percent in April, as the country works to hit an IMF-backed target of 35 percent for the end of the year. The monthly figure was much lower than the 1.76 percent a Reuters poll of analysts had predicted. Wholesale price inflation (WPI) showed a monthly rise of 0.4 percent in May for a yearly rate of 49.3 percent, down from 58 percent in April. The monthly rises in April were 2.1 percent for CPI and 1.8 percent for WPI. «People will be looking quite closely at April industrial production data to see how the supposed pickup in the economy is going,» said Caroline Gorman, analyst at 4Cast in London. Gorman said political uncertainty would continue to be the dominant factor in Turkish markets for the foreseeable future, but nonetheless the inflation data should help debt markets. «I think maybe these figures might start people thinking again about possible rate cuts,» Gorman said. «Obviously, that hasn’t been on the radar screens for the past few weeks, so it could be moderately supportive for the bond market tomorrow.» Yields on the busiest April 9, 2003 bills value dated Tuesday fell some 1.5 percentage points to some 63 percent after the inflation data was released. The paper had ended Monday-dated trading at yields of 64.79 percent. Lowest WPI The monthly WPI figure was the lowest since June 2000, statistics institute data showed. The Reuters poll had forecast a monthly rise of 1.58 percent for WPI. Analysts said a fall in agricultural prices, down 4.1 percent month-on-month, had started earlier this year than in previous years and was a major factor in the overall figures. «Agricultural prices were lower than the seasonal average and the rise in private sector manufacturing prices was lower than I had expected,» said Baturalp Candemir, economist at HC Istanbul. Core inflation, defined as private sector manufacturing prices, was 1.5 percent, down from 1.9 percent in April and lower than the 1.84 percent predicted in the Reuters poll. The State Statistics Institute said a 0.6-percent rise in the wholesale price of goods manufactured by the state and a 0.2-percent fall in the price of private sector goods made up the WPI monthly figure. Treasury Undersecretary Faik Oztrak said earlier GNP had been expected to contract 3 percent in the first quarter of the year, though he was optimistic about the full year. Turkey is working to emerge from its deepest economic slump since 1945 with the help of $16 billion in IMF lending, mostly targeted at reducing Turkey’s massive debt load. Yields on domestic debt had fallen to the low 50s earlier this year but have risen in the past month, hit by fears of political instability since Prime Minister Bulent Ecevit was admitted to hospital twice in May. Another program, partly funded by the General Secretariat for Research and Technology, aims to clean hydrogen of any traces of carbon monoxide by means of a catalyst. According to the researchers, the institute is taking part in an application for an international patent for the catalyst being developed.

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