BY ALATTIN AKTAS
Things are not going as planned. The rate of increase in prices is ‘expected’ to slow, but this isn’t happening. The Consumer Price Index (CPI) rose monthly by 4.81% in February after it increased by 13.58% in December and 11.10% in January. Although the February CPI seems to be a better good ratio, this doesn’t promise good things for the future.
The Domestic Producer Price Index (D-PPI) is in the same situation. The D-PPI rose monthly by 7.22% in February, after it surged by 19.08% in December and 10.45% in January. Although the February D-PPI is evaluated as a satisfying development, we are talking about an increase of over 7%.
Although the monthly increase rate of the two indices is slow, they are still far from a decline on an annual basis.
The D-PPI annually exceeded 100% and annual inflation surpassed 50% in February 2022. The D-PPI annually rose by 16% and annual inflation rose around 27% in February 2021.
The Russia-Ukraine war doesn’t have an influence on the price hikes in February. That’s why we’ll only see the very disruptive impacts of the war in the coming months.
The rate of increase was estimated to significantly decelerate towards the summer months and the annual rates were expected to decline once monthly increases went below the levels of last year. Now the hope to achieve that has gone.
>> Oil prices are breaking new records every day
>> Natural gas prices are surging around the world
>> We’re getting dizzy from watching hikes in fuel prices
>> Now, with the crisis, we have to track wheat prices
>> We can assume that one-third of our tourism revenues have been lost
>> We have to pay more foreign exchange (FX) for the same volume of imports as imported products have become more expensive, and we have to find this FX somewhere.
>> FX will gradually be depleted. This means the hike of FX prices.
Even if the war ends tomorrow, it won’t be easy to get rid of the impact of some of these problems. For instance, we won’t be able to compensate for the loss in tourism.
For instance, prices of goods may decrease as costs decline. But that won’t happen in services prices.
That’s why we’re facing a tough period for prices.
Even if prices are stabilized, which is unlikely to happen before the end of the year, they will stabilize at a high level.
Prices are already high and purchasing power is low. The number of those who will have difficulties in terms of purchasing power will further surge.
The annual inflation and D-PPI are expected to rise until November given the current state of affairs.
November seems like it will be a transition month. This transition month may be October for D-PPI. Annual rates will start to decline in December unless extraordinary negativity occurs.
