How Are Domestic Markets Reacting Following the Inflation Data?

The Turkish Statistical Institute (TÜİK) has announced the Consumer Price Index (CPI) and Producer Price Index (PPI) data for October 2024. CPI increased by 48.58% year-on-year and 2.88% month-on-month. CPI changes were 39.77% compared to December 2023, 48.58% compared to the same month last year, and 62.02% based on twelve-month averages. The transportation main group saw the smallest increase year-on-year at 26.14%, while the education sector recorded the highest increase at 93.66%. In October, however, transportation experienced the most significant decrease compared to the previous month, dropping by 0.54%. Clothing and footwear was the main group with the highest increase at 14.32%. When calculated excluding unprocessed food products, energy, alcoholic beverages, tobacco, and gold, the special comprehensive CPI indicator (B) increased by 47.10% year-on-year and 2.69% month-on-month. PPI was reported to have increased by 32.24% year-on-year and 1.29% month-on-month. Yearly changes in PPI were observed as follows: mining and quarrying increased by 40.11%, manufacturing by 32.85%, and electricity and gas production by 20.47%. Water supply also saw an increase of 43.19%. Price changes in the industry and manufacturing sectors showed yearly variations as follows: 31.79% for intermediate goods, 39.17% for durable consumer goods, 41.48% for non-durable consumer goods, 14.54% for the energy sector, and 33.84% for capital goods. PPI for manufacturing goods increased by 1.61% month-on-month. Monthly changes in the four sectors of industry resulted in an increase of 0.85% in mining, 1.61% in manufacturing, and a decrease of 1.56% in electricity and gas production. Water supply increased by 1.55%. Monthly changes in major industrial groups showed increases of 1.52% for intermediate goods, 2.82% for durable consumer goods, 1.90% for non-durable consumer goods, a decrease of 0.56% for the energy sector, and an increase of 0.67% for capital goods. The CPI remaining above expectations in October could lead to increased speculation regarding the postponement of the Central Bank of the Republic of Turkey's (TCMB) interest rate cut cycle to the first quarter of 2025. In this case, the strengthening of the Turkish lira may indicate an upward momentum in short and medium-term bond yields. Following the release of inflation data, the initial reaction in Borsa Istanbul was downward, with the BIST 100 index declining to the 8,780 point range, falling by up to 1%. The food, IT, banking, and holding sectors were among the most affected. In contrast, tourism, SMEs, and the insurance sector were observed as the sectors that remained positive during the morning session. In the bond market, upward movement was seen, while the dollar/TL remained flat at around 34.35. Conversely, the euro started the week with a positive trend against the dollar, and the euro/TL pair increased by 0.55% to reach 37.45. Following the inflation data, gold in grams retraced its partial gains and fell to the 3,020 TL threshold.