Response to Criticisms on Inflation Calculations from TÜİK President Çetinkaya

The President of the Turkish Statistical Institute (TÜİK), Erhan Çetinkaya, met with press representatives and economic news directors in the TÜİK Meeting Hall to discuss current issues. Responding to criticisms regarding inflation calculations, Çetinkaya stated that inflation is calculated in Turkey the same way it is calculated worldwide. Çetinkaya also mentioned that the difference between the Consumer Price Index (CPI) and the Producer Price Index (PPI) is not unique to Turkey.



"DISCUSSIONS REGARDING INFLATION CALCULATIONS WILL CONTINUE"



Çetinkaya stated that they have observed a downward trend in inflation starting from June and predicted that discussions regarding inflation calculations will continue. He emphasized that it is a subject open to perception manipulation and that they organized the meeting to provide accurate information. Çetinkaya explained that the CPI measures the changes in the general level of prices of goods and services consumed by households over time, based on a fixed basket of goods and services that represents the average consumption habits of Turkish households. He also pointed out that there have been debates in some media outlets about the CPI not measuring the cost of living, clarifying that the CPI and the cost of living index are different concepts. The CPI measures changes in the cost of a fixed "welfare" level, while the cost of living index reflects differences in the cost of a fixed basket of goods and services.



"WE CALCULATE CPI BY COMPILING OVER 600,000 PRICES MONTHLY"



Çetinkaya responded to criticisms regarding the suspension of price publications as follows: "We calculate the CPI by compiling over 600,000 prices monthly nationwide. We are one of the countries that announce these results earliest in the world. We share the CPI with the public on the 3rd business day of each month. Approximately 300,000 of these prices are obtained from cash register prices in supermarkets. These are collected at the end of the month. It is very difficult for these calculations to be ready by the 3rd day of the month, which is the date of announcement. Inflation is calculated by aggregating the weighted average of 600,000 prices. The average of the variations in the prices of different types of a good or service is taken. For example, can the price of a tomato in Van be the same as the price of a cherry tomato in Istanbul Etiler? The aggregated prices, which are the weighted averages of these prices, are used in inflation calculations. The basket of goods remains the same, and no one has the authority to hide the basket of goods. The unpublished tables are the prices of goods. In the past, the published prices of goods had no indicative value. To announce the prices of goods, an extra day of work is required. Therefore, we no longer publish these prices that no longer have indicative value."



"IT TRANSITIONS FROM TECHNICAL CALCULATIONS TO PERCEPTION MANAGEMENT"



Çetinkaya pointed out that when examining the websites of the statistical offices of European Union (EU) member and candidate countries, EFTA countries, the United States, and Canada, no country was found that publishes all prices at the item level. He stated that the Institution has been subjected to unfair criticism in this regard. Çetinkaya explained that in the news reflected in the media, when it is mentioned that prices of eggs or doctor visits are calculated, it refers to an aggregated price. For example, in a news article published today, the price of eggs is stated as 2.57 lira. Free-range eggs cost 5 lira. However, the price of a pack of 30 eggs is 2 lira. When looking at consumption weights, it is seen that people mostly consume packs of 30 eggs. Considering the average aggregated prices, 2.57 lira is a reasonable price for eggs. After a while, the issue transitions from technical calculations to perception management."



"WE HAVE RECEIVED COUNTLESS CRITICISM ON SOCIAL MEDIA"



Çetinkaya emphasized that the CPI is calculated in high compliance with Eurostat standards and said, "When natural gas support was provided last year, we received countless criticism on social media, claiming that we were announcing figures in favor of the government. However, natural gas prices were reduced to zero and everyone benefited. We asked Eurostat whether these discounted prices should be included in the index calculations. Eurostat stated that these discounted prices should be included in the CPI, and as TÜİK, we included them."



Çetinkaya also made evaluations regarding the inflation figures announced by TÜİK and the ENAG, stating that the methodology document, which provides information about the methods and practices used in calculations, is not shared on the ENAG's website. He expressed that the monthly CPI rates published by the ENAG are far from reflecting the truth and that their indices deviate from market prices by an average of 2-3 times over a period of nearly 4 years. Çetinkaya emphasized that appropriate sampling methods should be used for a study to represent the whole of Turkey. He stated, "We can see the difference between TÜİK and ENAG data in rental price calculations. For rental prices followed by TÜİK, just like all other goods and services prices, the monthly rental value of over 5,000 selected houses with a fixed definition and quality is monitored. ENAG directly obtains rental prices from real estate websites and calculates rent increases based on the assumption that all tenants have changed houses every month. ENAG calculates the increases it observes every month on the internet by incorrectly adding them together, resulting in an inflated rent calculation. This example shows how far ENAG is from the CPI methodology, even in just the rental item."



"EXCESSIVE PRICE INCREASES ARE LINKED TO COMPANY PROFITS"



Çetinkaya drew attention to academic studies indicating that company profits in Turkey have an inflationary effect and stated, "Companies in Turkey obtain excessive profits higher than what they should normally earn by using the inflationary environment. This distorts the market.

There is an excessive price increase dependent on company profits independent of inflation. This effect has been observed since the post-pandemic period. "

"INFLATION IS CALCULATED IN TURKEY JUST LIKE IT IS CALCULATED IN THE WORLD"

When the numbers between the official inflation announced by countries' official institutions and the perceived inflation are examined, it is explained that the numbers in Turkey have the closest ratios to each other compared to other countries, said Çetinkaya. "The issues related to perceived inflation are not unique to Turkey, and this situation is also observed in developed countries and expressed by Eurostat. For example, while the inflation felt in the EU has been at an average level 5 times higher than the announced inflation for the past 20 years, it has been at a level 2 times higher in Turkey," he shared.

Çetinkaya stated that inflation is calculated in Turkey just like it is calculated in the world and said, "The difference between CPI and Producer Price Index (PPI) is not unique to Turkey either." Çetinkaya mentioned that this gap has been observed worldwide since the beginning of 2021 and said, "They complained about TURKSTAT to the IMF Turkey Desk, wondering if something is going on there. The head of the IMF Turkey Desk came, looked at our calculations. They noticed that PPI has exceeded CPI not only in Turkey but also in other countries around the world and they said, 'Let's investigate this.' Recently, rating agencies also examined the statistics, and they returned with satisfactory answers," he said.

"SOME INCREASES WILL AFFECT THE JULY INFLATION FIGURES"

TURKSTAT President Çetinkaya responded to the criticisms that the June CPI figures, where civil servant salary increases were announced, came below expectations, stating that there is a misconception that the announced increases in June will immediately reflect in the June CPI figures. Çetinkaya stated that June is the month with the lowest inflation when looking at the long series of 20-40 years, saying, "Because agricultural products start to come out. Therefore, this is a normalization. Although the increases are announced in June, their effective date is July. Some postponed increases since June will affect the July inflation figures. Exchange rates are also one of the determinants of inflation in Turkey. The stability in the exchange rate has a significant impact on monthly inflation, suppressing the increase in inflation. If the exchange rate decreases, there may be price decreases in some items."

WHAT HAPPENED?

The list that was claimed to be related to the item prices in TURKSTAT's inflation calculation sparked a big controversy. In the list, it was seen that the fee for a specialist doctor examination was 34 TL, dormitory fees were 457 TL, rents were 5,845 TL, white cheese was 147 TL, and eggs were 2.5 TL.