Why the ncrease n producer pr ces slowed down
Each time exchange rates rise in Turkey, we hear discourses like: “Our economy is very strong. This increase cannot harm us.” With the data released by TurkStat last week, it came to light that there is no basis for this rhetoric. We do not know which economic theory or which truth of Turkey it derives from.
In September, the average of the dollar fell from 6.37 to 5.86 in October. The Turkish lira appreciated for the first time against the dollar this year.
Here we have seen the impact of this on the producer price index (PPI). The domestic PPI increased by 0.91 percent in October. This is the lowest monthly increase in 2018, lower than the increase in the last three months of last year. That is, the lowest increase in the last thirteen months was in October.
When the rise in October remained below last year, the year-on-year increase, which rose to 46.15 percent at the end of September, fell to 45.01 percent at the end of the month.
But the rate is still 45 percent! I guess no one would be happy that the PPI is rising by only 45 percent! This is a very high rate, no doubt.
We need to emphasize this. We just witnessed how rising exchange rates led to a series of destructive events in the economy, and when the opposite happens the price increases have been more moderate.
Moreover, the negative impact of the exchange rate increase in the economy is not only inflation. We’re observing this in many other areas.