TÜİK President's 'inflation' comment: It is not disclosed in many countries around the world

Turkish Statistical Institute (TÜİK) President Erhan Çetinkaya made statements regarding Consumer Price Index (CPI) calculations.

Çetinkaya met with Ankara representatives of media organizations and economy news editors at the TÜİK Meeting Hall to answer questions regarding inflation calculations and criticisms.

Stating that they have observed that inflation began a downward trend with June, Çetinkaya said they anticipate that discussions regarding inflation calculations will continue, that this is a subject open to perception management, and that they organized the meeting to explain the accurate information for this reason.

Çetinkaya stated that the CPI measures the change in the general level of prices of goods and services subject to consumption expenditures over time, noting that the index is based on a fixed basket of goods and services representing the average spending habits of Turkish households and measures the average change in retail prices faced by consumers.

Pointing out that there are discussions in some media outlets regarding the fact that the CPI does not measure the cost of living, Çetinkaya emphasized that the CPI and the cost of living index are different concepts; while the CPI measures the change in the cost of a fixed basket of goods and services, the cost of living index reflects differences in the cost of a fixed level of "welfare."

"WE CALCULATE THE CPI BY COMPILING OVER 600 THOUSAND PRICES MONTHLY"

TÜİK President Çetinkaya responded to criticisms regarding their decision to stop publishing item prices as follows:

"We calculate the CPI by compiling over 600 thousand prices across Turkey every month. We are one of the countries that announce these results the earliest in the world. We share the CPI with the public on the 3rd business day of every month. Approximately 300 thousand of these prices consist of checkout prices taken from markets. This is also collected at the end of the month. It is very difficult to meet the 3rd of the month, which is the announcement date for these calculations. Inflation is a calculation where the weighted average of 600 thousand prices is aggregated. The average of the varieties of an item or service is taken. For example, can the price of a tomato in Van be the same as a cherry tomato in Etiler, Istanbul? Prices aggregated by taking the weighted averages of these are used in inflation calculation. The item basket is still there; it is not within anyone's authority to hide the item basket; the tables that are not published are item prices. The item prices announced in the past did not have the quality of an indicator. It requires an extra day of work to publish item prices. For this reason, we no longer publish these prices, which do not carry the quality of an indicator."

Çetinkaya drew attention to the fact that when the websites of statistical offices of European Union member and candidate countries, EFTA countries, the USA, and Canada are examined, there is no country that publishes all prices at the item level, and reported that the Institute has been subjected to unfair criticism in this regard.

Stating that some prices in the item basket are calculated by carrying the index over time in news reflected in the press, Çetinkaya made the following evaluation:

"When egg or doctor examination prices are mentioned, a consolidated price is being referred to. For example, in a news report reflected in the press today (yesterday), an egg price of 2.57 liras is mentioned. Free-range chicken eggs are 5 liras. But the price per egg for a 30-pack is 2 liras. When looking at consumption weights, it is seen that citizens mostly consume 30-packs of eggs. When looking at average consolidated prices, 2.57 liras is a very logical price for eggs. After a while, the event moves out of technical calculations and enters perception management."

Pointing out that the CPI is calculated in high compliance with Eurostat standards, Çetinkaya said, "Last year, during the period when natural gas support was provided, we were heavily criticized on social media as TÜİK for 'announcing figures in favor of the government.' However, natural gas was zeroed out and it was reflected in everyone's pocket. We asked Eurostat whether this support should be included in index calculations. They stated that the discounted prices in question should be calculated within the CPI, and we, as TÜİK, included it in the calculation."

"ENAG MAKES CALCULATIONS BASED ON THE ASSUMPTION THAT ALL TENANTS HAVE MOVED HOUSES EVERY MONTH"

Çetinkaya also made evaluations regarding the inflation figures announced by TÜİK and ENAG, stating that information regarding the methods and practices valid in the calculations is not shared in the methodology document accessed from ENAG's website.

Expressing that the monthly CPI rates published by ENAG are quite far from reflecting the truth, Çetinkaya noted that it can be seen that their indices have moved away from market prices by an average of 2-3 times in a period of nearly 4 years.

Underlining that appropriate sampling methods must be used for a study to represent Turkey as a whole, Çetinkaya noted the following:

"We can see the difference between TÜİK and ENAG data in rent price calculations. For rent prices tracked by TÜİK, as in all other goods and service prices, the monthly rental value of over 5 thousand residences selected with fixed definitions and quality is monitored. ENAG, on the other hand, takes rent prices directly from real estate websites and calculates rent increases based on the assumption that all tenants have moved houses every month. ENAG makes calculations as if all tenants are moving to a new house every month, and by incorrectly stacking the increases it observes on the internet every month, it makes an inflated rent calculation. This example reveals how far ENAG is from the CPI methodology, even in the rent item alone."

Çetinkaya also evaluated the comments regarding the differences between the CPI and the ITO Istanbul Wage Earners Cost of Living Index, stating that ITO received the methodology for these calculations from TÜİK 30 years ago, but these methods are now outdated. On the other hand, he stated that in these calculations, ITO uses a very small model of TÜİK and its scope is narrower compared to the CPI.

Expressing that method differences cause divergence in both main group rates and cost of living index and CPI rates, Çetinkaya said that this divergence attracts more attention in periods of high inflation compared to periods of low inflation, and that item baskets changing in parallel with constantly changing consumer habits cause the difference between the 2 indices to increase.

"THERE IS AN EXCESSIVE PRICE INCREASE DEPENDENT ON CORPORATE PROFITS"

TÜİK President Çetinkaya pointed out that according to academic studies, corporate profits in Turkey have an effect that pushes inflation upward, saying, "Companies in Turkey are using the inflationary environment to obtain exorbitant profits higher than the profits they should normally receive. There is an excessive price increase dependent on corporate profits independent of inflation. This effect has been observed since after the pandemic."

"HOWEVER INFLATION IS CALCULATED IN THE WORLD, IT IS CALCULATED THE SAME WAY IN TURKEY"

Explaining that when looking at the figures between the inflation announced by the official institutions of countries and the perceived inflation, the figures in Turkey are the closest to each other compared to other countries, Çetinkaya shared the information, "Issues regarding perceived inflation are not unique to Turkey; the same situation is seen in developed countries, and this situation is expressed by Eurostat. For example, while the inflation felt in the EU has hovered at an average of 5 times the announced inflation over the last 20 years, it has hovered at 2 times in Turkey."

Stating that inflation is calculated in Turkey just as it is calculated in the world, Çetinkaya said, "The difference between the CPI and the Producer Price Index (PPI) is not unique to Turkey either."

Stating that this gap has been observed all over the world since the beginning of 2021, Çetinkaya said, "They complained about TÜİK to the IMF Turkey Desk, asking if something is going on there. The IMF Turkey Desk chief came, they looked at our calculations. They realized that the PPI had risen above the CPI not only in Turkey but also in other countries in the world, and they left saying, 'Let us investigate this.' Recently, rating agencies also examined the statistics, and they also returned after receiving satisfactory answers."

"SOME PRICE HIKES WILL AFFECT JULY INFLATION FIGURES"

TÜİK President Çetinkaya also responded to criticisms that the June CPI figures, where civil servant salary increases were determined, came in below expectations, stating that there is a false perception that the hikes announced at the end of June will immediately be reflected in the June CPI figures.

Expressing that June is the month with the lowest inflation when looking at inflation in a long series of 20-40 years, Çetinkaya concluded his words as follows:

''Because field products begin to emerge. Therefore, this is a normalization. Although the hikes are announced in June, the effective date is July. Some hikes that have been postponed since June will affect the July inflation figures. Exchange rates are also one of the inflation determinants in Turkey. Stability in the exchange rate has a serious effect on monthly inflation; it suppresses the increase in inflation. If the exchange rate falls, there could be price declines in some items."

News Source: AA