What Is TÜFE (Turkey's CPI)?

TÜFE is the abbreviation of Tüketici Fiyat Endeksi — Turkey's Consumer Price Index — and it measures how the price of a fixed basket of goods and services consumed by households changes over time. Turkey's official consumer inflation is computed from this index; it is produced by the Turkish Statistical Institute (TÜİK) and released every month for the previous month.

What TÜFE measures

At the core of the index is a basket: hundreds of goods and services spread across main spending groups such as food, housing, transport, clothing, health, education, communication and recreation. Each item's weight in the basket reflects the share an average household's budget devotes to it, so a change in the price of bread is weighted more heavily than a rarely bought product.

Each month TÜİK collects prices for these items and produces an index value. The index is normalized to a base period: the base period equals 100, and later months are read relative to that 100. The index itself is not a "price" but a relative measure of the price level.

How annual inflation is calculated

Inflation is the rate of change of the index between two dates. The two most common definitions:

• Monthly inflation: this month's index ÷ last month's index.
• Annual inflation: this month's index ÷ the same month's index a year earlier.

For example, if the index rose from 100 to 140 over a year, annual inflation is 40%. When the news says "inflation was announced," it usually means this annual figure. There are also derived measures such as year-to-date change (YTD) and the twelve-month average; all are derived from the same index.

TÜFE, real return and comparing funds

A return on paper — not adjusted for inflation — is called nominal return. While prices rise in general, part of a nominal return only compensates for the erosion in money's purchasing power. What remains after removing inflation's effect is the real return.

Here TÜFE acts as a denominator: dividing a fund's return by the TÜFE increase of the same period shows whether the investment preserved purchasing power. On Fon.org.tr, when you switch between return modes, the default real-return mode uses official TÜFE. This answers "what did it earn in purchasing power" rather than "what did it earn on paper" when comparing TEFAS funds. For more on the topic, see inflation.

TÜFE and alternative measures

TÜFE is Turkey's official inflation measure, and it is the reference used in legislation, contracts, and interest and wage adjustments. Alongside it, some independent groups publish separate indices with their own baskets and methods; the best known is enag (the Inflation Research Group). The rates ENAG announces can at times differ from TÜFE, owing to differences in basket composition, weights and data collection.

This page takes no side on which measure is "correct." So that comparisons can be made, Fon.org.tr offers both official TÜFE and ENAG as separate options in its real-return modes; which denominator to view is left to the user's choice.

Summary

TÜFE is the official index that reduces the movement of consumer prices to a single number. From this index, released monthly by TÜİK, inflation is calculated as the ratio between two dates. When evaluating fund returns, TÜFE is the denominator needed to convert a nominal figure into a real gain; it is the measure that determines the gap between nominal and real return.