Seyfettin Gürsel, Hamza Mutluay
Consumer price index (CPI) which is announced monthly by Turkish Statistical Institute (Turkstat) shows the rate of increase in the value of the consumption basket of a representative household. Therefore, the official inflation rate represents the inflation rate that a representative household faces. However, the weights of the goods and services in the consumption baskets of households in different expenditure groups may be different from the composition of the basket that a representative household consumes. For this reason, the inflation rates of different expenditure groups may change in time. In this research note, we calculated the cumulative inflation rate of each expenditure decile by using the data in Household Budget Survey (HBS) between 2003 and July 2021.
Our analysis does not provide support for the conventional wisdom that the cumulative inflation rate is the highest in the lowest expenditure group but the lowest in the highest expenditure group. Some of our findings are unexpected and surprising. As of July 2021 (2003=100), the group with the lowest cumulative inflation rate is the penultimate highest expenditure group. The cumulative inflation rate of the lowest expenditure group, i.e., “the poorest”, is the second lowest inflation rate by a small margin. Contrary to expectations, the cumulative inflation rate of the highest expenditure group, i.e., “the richest”, is the third highest cumulative inflation rate.
Along with these findings, inflation rates of other expenditure groups are mostly in line with the common perception. Even though inflation rates do not systematically increase as the expenditure level lowers, the second lowest expenditure group faces the highest cumulative inflation rate.