As debate of world economies flailing continues as the economic sector gears up to enter into the year 2011, it appears that one by one, the targets set for this past year by Turkey have indeed been met.
Food prices contributed to the return to normal of 2010's annual inflation rate and the 6.40 percent consumer price index (CPI) means Turkey's economy has met the estimated target. Exports surpassed expectations, completing 2010 at 113.7 billion dollars. According to data released by the Turkish Statistics Institute, inflation in 2010 dropped by 0.13 points reaching the 6.4 percentile. This translates to a 0.1 point difference to the target set by the Central Bank. As the year came to a close with the final monthly inflation rate dropping by 0.3 percent, it appears the most significant reason for the previous inflation increase was also the reason behind the drop as food prices recessed by 2.66 percent month to monthly drop.
The following are the top headlines for inflation in 2010: The bad boy of inflation, food prices, has deceived everyone's expectations, including the Central Bank. Having hit the double digits within the year, the food price index surprised all with a 2.66 percentage drop in December. As the most important factor behind inflation, food prices closed out the year 2010 with a 7.02 percentage increase. Expectations for the first quarter of 2011 are for the drop to continue while bringing inflation down to under the five percentile. That is of course, if there are no new surprises!
A RATE REDUCTION MAY BE ON ITS WAY
- Alcohol and tobacco products topped the list of the highest increasing expense item at 24.66 percent, with tax increases being a significant factor in the rise of prices.
- Following alcohol and cigarettes are restaurant and accommodation expenses which increased by 9.76 percent and transportation at 6.78 percent. Increased prices as a result of higher fuel prices contributed to the rise.
Even though core inflation rates were low in December, slight movement upwards was observed. Separating seasonal items from the Consumer Price Index, the calculated inflation for December was at 0.61 percent, closing out the year 2010 at 6.43 percent. Not including energy prices, the consumer price index dropped to 5.83 percent. In other words, energy prices have significantly affected the increased consumer price index of recent months. The Consumer Price index without the addition of 'energy, food, alcohol, cigarettes and gold prices,' as also followed by the Central Bank, shows an annual inflation rate of 2.99 percent, dropping 4.4 points from the official inflation rate. Therefore, these four categories, namely alcohol and tobacco, food, energy and gold could be considered the bane of existence in terms of inflation.
The low levels of the core indicators versus a limited increase, also relieves the hand of the Central Bank. This could open the way for a new drop in inflation.
The Producer Price Index (PPI) increasing by 1.3 percent on a monthly basis also surpassed expectations, closing out the year 2010 at 8.9 percent.