BY ALAATTIN AKTAS
Although September 1 is World Peace Day, we celebrated it as ‘Price Hike Day’ in Turkey.
Some price hikes affect only those who consume that product while others concern all goods and services production. The new hike in electiricty and natural gas prices as of September will affect all goods and services.
Turkey increased the price of electricity used by homes and agricultural activities by 20.0%, that consumed by the public and private services sector and other groups by 30.0%, while the price of electricity for the manufacturing industry was raised by 50%.
It raised the price of natural gas used by power plants by 49.5%, the gas used by industry by 50.8%, that consumed by SMEs by 47.6%, and consumer gas prices increased by 20.4%.
It will be misleading to focus on the hike in residential consumption alone. The price of all goods and services will increase when the cost will surge in other fields.
Electricity and natural gas price hikes, especially the surge in electricity prices, create a tsunami effect. We’ll see it as of September.
The weight of electricity is 2.3256% and the weight of natural gas is 1.5496% in the Consumer Price Index (CPI). The impact of a 20% price hike in residential use will be 0.46 points in electricity and 0.31 points in natural gas the September CPI data in line with this.
These two items will raise the September CPI data by 0.77 points. This is the direct impact. As non-residential price hikes were higher, the indirect impact may be more than the direct impact.
Everyone knows that hopes have been set on relatively low hikes in December and January for an inflation decrease. The rates of 13.58% in December and 11.10% in January will no longer be a part of inflation and lower rates will replace them. Thus, the annual inflation will rapidly decline. This decrease won’t mean a decline in prices. The rate will fall but prices will continue to rise.
Now, the following opinion has started to be mentioned: “The heart of base effect may sink.”
I’m not sure. It may even go against the grain.
If the price hikes usually applied in December and January are moved to an earlier time, it means in a sense that the government is preparing for those months so that they can show a decline in annual inflation.
If price hikes, which will have a major indirect impact, are made sooner, the effect won’t be as high in December and January as they will be spread over time.
That’s why it seems that the risk of a 3-month high inflation in September has already been taken. The rates must be high so that a decline can be seen in December and January.