It is not a new thing to see different statistics provided by the Central Bank of Iran and the Statistical Center of Iran concerning the same economic indicator, the latest of which is the consumer inflation for the fiscal 2019-20.
The annual Consumer Price Index measured by SCI for the period was reported at 34.8% whereas according to CBI it grew by 41.2%. The Persian-language daily Shargh spoke with Ayyub Faramarzi, SCI’s deputy head, in this regard.
“What is noticeable in CBI’s method of calculating consumer inflation is that the central regulator only takes into account the average price of few large cities to come up with the inflation rate. It does not factor in the inflation rates of small cities and villages whereas nearly 25% of Iran's population live in rural areas and have different pattern of consumption when compared with urbanites,” he said.
“SCI, on the other hand, includes many cities and villages when measuring the country’s inflation rate. Over the past couple of years, the inflation rates of rural areas have been higher than those of urban areas.”
Bank Melli Iran was the body in charge of calculating economic indexes from the fiscal 1936-37 to fiscal 1959-60, when CBI was established. But after SCI was established in 1974-75, the responsibility of calculating the inflation and economic growth rates was laid on the center, according to the law.
CBI continued to produce and publish statistics, regardless. Even recently, despite the decision by the Statistical High Council, affiliated to the Plan and Budget Organization of Iran, reaffirming SCI as the sole authority for producing and publishing the country’s official statistics, CBI has continued to publish data on social media.
Only in 3% of all countries, those that have no statistical centers, like Honduras and Eritrea, are central banks responsible for collecting and publishing statistical information.
“The most interesting point is that Iran is the only country in the world, where two governmental organizations measure inflation and economic growth rates,” he said.
Methodology
Asked how SCI calculates the consumer inflation rate, Faramarzi said SCI measures the rate based on the average of the whole country, urban and rural areas, income deciles and provinces.
The prices of 457 households’ consumer items and services are derived from retailers of 231 cities and 626 villages on a monthly basis, which result in 360,000 quoted prices.
“The rising trend of prices started in the month ending April 20, 2017, reaching its peak in the month ending Sept. 22, 2019, and since then prices have been on a declining trend. Over the past couple of years, we’ve witnessed the highest and lowest rates of year-on-year consumer inflation i.e. a comparison between the prices of 457 items at one point in time,” he said.
“The upward year-on-year trend of inflation began in the fiscal 2018-19 and hit a record high of 52.1% in the month ending May 21, 2019, the highest year-on-year inflation rate since the Islamic Revolution of 1979. Since that month, the year-on-year inflation rate has decreased reaching 22% in the month ending March 19.”
The average goods and services CPI in the 12-month period ending March 19, which marks the final day of the 12th Iranian month and the fiscal 2019-20 increased by 34.8% compared with the corresponding period of the year before.
SCI had put the annual inflation rate for the preceding Iranian month, which ended on Feb. 19 at 37%. The consumer inflation for the month under review (Feb. 20-March 19) registered a year-on-year increase of 22% compared with the similar month of the previous year.
The overall CPI (using the Iranian year to March 2017 as the base year) stood at 200.5 last month, indicating a 1.5% rise compared with the month before.
Urban vs. Rural Inflation
On urban and rural inflation rates, the official said the two rates were nearly the same up until the month ending Dec. 21, 2018.
“Since then, the growth in goods and services prices has always been higher in rural areas. In fact, economic instabilities have hit the rural community more seriously than those of urban areas. Such a difference in inflation rates was conspicuous in the fiscal 2013-14 and 2018-19 as well,” he said.
CPI registered a year-on-year increase of 22.2% for urban areas and 21.1% for rural areas in the month ending March 19, 2020, compared with the similar month of last year.
The overall CPI reached 199.5 for urban households and 206.2 for rural households, indicating a month-on-month increase of 1.4% and 1.8% for urban and rural areas, respectively.
SCI put urban and rural 12-month inflation for the month under review at 34.4% and 37.3% respectively.
Forward-Looking Indicators
Several indexes, including the Producer Price Index, the Import Price Index and the money-supply index, are viewed as indicators with a predictive nature for consumer inflation, Faramarzi said.
“For example, PPI has been on the decline from the quarter ending Dec. 21, 2018, to the quarter ending Dec. 21, 2019, except for the quarter ending March 20, 2019. Changes in foreign exchange rates impact the inflation rates dramatically, given the heavy reliance of the country’s production and consumption on imports. The first effect of changes in foreign exchange rate is reflected in the import price index,” he added.
The Producer Price Index in the four-quarter period ending Dec. 21, 2019, which marks the end of the third quarter of the current Iranian year, grew by 50% compared with the corresponding period of the year before. The index calculated for the period leading to Sept. 22, 2019, marking the end of Q2 of the current year, had increased by 59.9%.
PPI (using 2011 as the base year) stood at 475.9 in last year’s Q3 (Sept. 23-Dec. 21, 2019), indicating a 0.3% decrease compared with the previous quarter and a 25.6% growth over the same quarter of the year before.
The Import Price Index (using the year ending March 2012 as a base year) stood at 3755.2 in Iran for the third quarter of the last Iranian year in terms of rial, registering a 38.7% increase compared with the quarter before and a 250.3% rise compared with the same quarter of the year before.
The average IPI during the four quarters leading to Dec. 21 witnessed a 220.7% growth year-on-year.
The three-month period also saw IPI stand at 429.9 in dollar terms, registering a 14.3% increase quarter-on-quarter and a 55.5% rise year-on-year. The average IPI in dollar terms during the four quarters leading to Dec. 21 witnessed a 44% growth year-on-year.
The official believes that with economic fluctuations, the impact of money supply on price indexes is ambiguous and unpredictable in the short-term.
“For example, there is a situation called 'liquidity trap' when monetary policies become ineffective due to very low interest rates combined with consumers who prefer to save in cash rather than making investments. While a liquidity trap is a function of economic conditions, it is also psychological since consumers are making a choice to hoard cash or buy gold, foreign currency or capital goods like home instead of choosing investments in manufacturing sectors because of a negative economic view,” he said.
Money supply in Iran crossed 22,623 trillion rials ($140.51 billion) at the end of the third Iranian quarter (Dec. 21), the Central Bank of Iran reported.
The figure shows a 28.2% growth compared with the corresponding month of last year. Liquidity grew 20.2% since of the end of the last fiscal year in March 2019.
While the monetary base has remained unchanged compared to the previous month, the juxtaposition of monthly CBI reports reveals a steady increase in the unprecedented pace of liquidity growth.
CBI had stopped publishing monthly data on money supply and other economic indices in August 2019 before publishing several monthly reports separately on Feb. 13.
Asked about the inflation rate in the new Iranian year that started on March 20, Faramarzi said he couldn’t predict the future changes in the inflation rate due to the instability of current economic conditions.
However, he said, “If the current trend persists, the inflation would become unmanageable to a great extent.”
