Wednesday, December 1, 2010

On ICC and TurkStat inflation

Blog follower Rower32 has the following comment on inflation, as a comment to a recent post, which was, incidentally, also answering his questions:
Although it's too early to make verdict on the inflation, last month's data, except were def on the bullish side (PMI & Cap Uti). This morning I saw the prices in Istanbul were up 0.34% mom in Nov due to a fall in food prices. I don't know how CPI Istanbul and CPI-U are related but my guess is that they are highly correlated (chart?). According to data looks like the inflation will either go up or down or stay the same.
The inflation figures of TurkStat and Istanbul Chamber of Commerce, or ICC, are not really all that correlated:
But there is a better relationship between TurkStat's food & beverages inflation and the ICC food inflation:
And for that reason, most Turkey economists pay more attention to ICC's food sub-index than the headline figure. It is likely that the + food print of yesterday's ICC has led many to except a benign inflation print on Friday.

BTW, let me spell out my view on inflation once again: Although I don't do official monthly forecasts of inflation like I did during my days as a market economist, I continue to informally & unofficially! play with numbers:

I see inflation falling falling yoy because of base effects. In fact, I expect inflation to fall to around 8 percent this month and end the year at 7.8 percent. The yoy falls will accelerate, again because of base effects in the first quarter, and I would not be surprised with a yearly inflation in the 5.5-6 percent range in February-March. But then, with base effects over, I see inflation creeping up and refusing to come down. I find it unlikely that the end-year CBT target will be achieved...

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