Falling housing and electricity prices also contributed to January’s slowing inflation rate, as did a drop in recreation and culture prices.
Inflation in Turkey dropped for the eighth month in a row in January, taking it to its lowest figure since June 2023 and indicating the country is gaining a slightly better grip on the on the problem.
The year-on-year inflation rate for January came in at 42.1%, according to the Turkish Statistical Institute, down from December’s 44.4%, although still above market estimates of 41.3%.
Prices slowed across the majority of sub-indices, with non-alcoholic beverages and food inflation falling to 41.8% in January from 43.6% in December. Similarly, inflation for water, housing, electricity, gas and other fuels also inched lower in January.
Recreation and culture inflation saw one of the larger decreases, at 33.1% in January, compared to 37.6% in December. Footwear and clothing prices also saw a marked drop, falling to 27.5% in January, from 32.3% in December.
Transport, furnishings, routine maintenance and household equipment prices slowed in January as well.
Year-on-year core inflation, which excludes food and energy prices due to their inherent volatility, fell to 42.7% in January, the lowest number in two years.
However, month-on-month inflation rose 5% in January, the highest rise since January 2024 and in contrast with 1% in December and analyst expectations of 4.4%. This was mainly because of Turkey raising its minimum wage levels.
Turkish economy still slow to recover
Although January’s inflation print points to Turkey recovering a little from its recent economic challenges, hurdles still remain. The country started to try tackling soaring inflation through cutting interest rates, a strategy put forward by President Recep Tayyip Erdoğan, who believed that slashing interest rates helped better control inflation, a strategy largely at odds with other major central banks.
Subsequently, the central bank chose to hike interest rates and inflation is now seen to be easing.
However, Turkey’s inflation rates remains high compared with other countries
Turkey’s consumer confidence index dropped in January as well, coming in at 81, marginally down from December’s 81.3, which was a one-and-a-half-year high. This was mainly because of dampening consumer expectations for their financial situations in the next year, as well as falling expectations of durable goods spending.
Turkish consumers reported feeling a little more optimistic about the overall economic outlook for the year ahead, as well as for their own financial situations.
