The inflation figures for consumer goods have been released for August. Looking at the Consumer Price Index (CPI) and the Producer Price Index (PPI), the inflation rates for August are as follows:
- CPI for August: 10.68%
- Domestic PPI for August: 16.34%
Comparing the announced August inflation rates with prior values, the CPI shows a 0.52% monthly increase, while the domestic PPI rose by 0.85% compared with the previously published official figures.
These figures are published by the Turkish Statistical Institute (TurkStat). According to the continuously updated data on the institute’s website, examining the 12-month averages alongside the August rates shows a 9.66% increase in consumer prices and a 12.05% increase in producer prices over the past year. In other words, over the 12-month period the monthly CPI rose by 0.52% and the domestic PPI by 0.85%.
When comparing CPI to last year’s December, the index is up 6.6%, and compared to December of the previous month it shows a net increase of 10.68%. For domestic PPI over the same interval, the increase is 9.52%, with an overall rise of 16.34%. Although TurkStat has issued inflation expectations for August and subsequent months, the anticipated inflation targets since December have not been achieved.
2017 Inflation Expectations
Financial analysts conducted a survey among economists on expected CPI for August. The survey expected a 0.15% increase in CPI for August 2017. Economists interpreting the poll results suggested that the August expectation would translate to an annual rate of about 10.27% compared with the previous month.
How Is Inflation Calculated?
TurkStat’s inflation calculations always rely on a base period. When calculating August 2017 inflation, analysts may compare the index to the previous month or to the same month in the prior year. Annual inflation, commonly represented by the CPI, is best explained with a simple example:
- Assume the cost of the same branded goods and specifications is 1,000 TRY at the base period.
- Because this price is used as the base, a 1,000 TRY expenditure is assigned an index value of 100.
- If at a later date the same goods with the same specifications cost 1,100 TRY, the 100 TRY increase represents a 10% rise.
- Thus, relative to the base period, the CPI would indicate a 10% increase.
This simple example illustrates the basic approach to inflation calculation. In practice, the same basket of goods is tracked each year to calculate inflation. If new calculations using previous inflation as the base show an increase, that rise indicates a reduction in purchasing power for people with fixed incomes.
The Consumer Price Index (CPI) and the Producer Price Index (PPI) are directly linked. CPI reflects what consumers pay when purchasing goods and services, while product prices are influenced by PPI. PPI measures how much the costs of raw materials and production expenses paid by producers have increased compared with the previous period. When PPI rises, CPI tends to follow with increases as producer costs feed through to consumer prices.