Mar 27, 2014 - 0 Comments - Data -

Inflation

Nalan Yırtmaç

If there is a continuous increase in the overall price levels in a country, the economists call this inflation (deflation, if the opposite occurs). However, speaking about overall price level, it is practically impossible to track how much each and every product costs. Therefore, when the inflation dataset is generated, a basket of certain goods and services are selected and the changes the “overall” price levels are calculated by using this basket of commodities.

The increase and decrease of the overall price level are calculated making use of different baskets of goods and services: CPI (Consumer Price Index), PPI (Producer Price Index) and WPI (Wholesale Price Index). While CPI shows how the consumers are affected from inflation, one should check the PPI in order to understand how the producers are affected from the overall price level.

In Table 1, we zoom in on the trends of these three indices from 2004 to 2013. Even though these indices are generally in parallel, due to the 2009 global crisis, while the drop in CPI remained limited, the WPI and PPI fell significantly during the second and third quarters of 2009.

Table 1

This shows that it is possible to observe divergences among different index trends. In this example, the conditions of crisis created a pressure on wholesale and producer prices due to their adverse effects on production and trade. As the volume of trade and production declined, demand for goods and services also declined. This led to a general fall in price levels. Yet since we did not observe a similar fall in the demand for commodities which make up the basket for CPI, the fall in their prices remained limited.

Sources:

The inflation dataset is downloaded from The Central Bank of The Republic of Turkey, “GENERAL STATISTICS” link.

Statistical Table: “Consumer Price Index (2003=100) (TURKSTAT) (Monthly)”, “Producer Price Index (2003=100) (TURKSTAT) (Monthly)”, “Wholesale Price Index (1968=100) (ICC) (Monthly)”

Image: Nalan Yırtmaç

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