An encouraging inflation print

TURKEY - Report 03 Jun 2025 by Murat Ucer

May CPI inflation surprised to the downside, coming in at 1.5%, m/m, compared to the market consensus (and our forecast) of around 2%, with the 12-month rate thus dropping notably to a 42-month low of 35.4% from 37.9% in April. Domestic producer prices rose by 2.5%, m/m, in May, resulting in the first increase in the 12-month rate since June 2024 - to 23.1% from 22.5% a month earlier.

The decline in monthly CPI inflation (compared to the same month in 2024) was broad-based, with all sub-categories (except transportation) contributing less or around the same amount to overall inflation as in May last year, though food and housing inflation were the key drivers of the improvement.

To our surprise, food (and beverage) prices fell by 0.7%, m/m, thanks to a sharp drop in unprocessed food prices in the month (by 3%), which is the first negative May food inflation print since May 2019. Annual food inflation thus dropped to 32.9% from 36.1% in April, on the back of both lower processed and unprocessed food inflation.

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