The average Producer Price Index for the mining sector in the four-quarter period ending March 19, 2020, increased by 45.1% compared with the same period of last year, according to the latest data released by the Statistical Center of Iran.
The sector’s average PPI for the four-quarter period to Dec. 21, 2019, end of Q3, had increased by 52% year-on-year.
The average annual producer inflation of the “iron ore extraction” subsector in Q4 was at 104.4% and those of “extraction of metal ores” and “extraction of other mines” subsectors were at 43.1% and 36.8%, respectively.
The overall PPI of mining sector (using 2011 as the base year) stood at 541.2 in Q4, indicating a 3.4% increase compared with the previous quarter and a 33.3% growth over the same quarter of the year before.
The quarter-on-quarter producer inflation of the “iron ore extraction” subsector was at 1.8% in winter and those of the “extraction of metal ores” and “extraction of other mines” subsectors were at 4.1% and 1%, respectively.
The year-on-year producer inflation of the “iron ore extraction” subsector was 105.8% and those of the “extraction of metal ores” and “extraction of other mines” subsectors were 29.3% and 31.2%, respectively.
Industries
The overall PPI of the industrial sector stood at 543.6 in the fourth quarter of last year, indicating a 1.8% increase compared with the previous quarter and a 13.3% growth over the same quarter of the year before.
The lowest quarterly PPI inflation rates were recorded for “coal production industries-oil refineries” subsector with -6.9%, “radio, television and telecommunication devices” with 0% and “tobacco production” with 0%. The highest quarterly PPI inflation rates were posted for “base metals” with 21.6%, chemical industries with 8.9% and “production of office machinery” with 8.6%.
The industrial PPI in the four-quarter period ending March 19 grew by 41.8% compared with the same period of the year before, SCI said.
The sector’s PPI for the four-quarter period to Dec. 21, 2019, which marked the end of Q3 of last Iranian year, increased by 61.5%.
The lowest year-on-year PPI inflation rate was registered for “coal production industries-oil refineries” subsector with -12.1% and the highest increase was posted by “production of office machinery” with 137.8% compared with the same quarter of the year before.
The lowest annual PPI inflation was recorded by “tobacco production” with 28.6% and the highest increase was reported for “production of office machinery” with 131%.
Services
The overall PPI for the services sector (using 2011 as the base year) stood at 412.6 in Q4 of the last fiscal year (ended March 19, 2020), indicating a 4.1% increase compared with the preceding quarter and a 25.6% rise compared with last year's same quarter.
Services PPI is calculated based on the indexes of eight subsectors, namely “repairing motor vehicles, motorcycles and home devices”, “hotels and restaurants”, “transportation, warehouse services and communications”, “brokerage (insurance) services”, “real estate, renting and business”, “education”, “health services and social work”, and “other public, social and personal services”.
PPI for “repairing motor vehicles, motorcycles and home devices” stood at 530.8, indicating a 4.4% rise compared with the previous quarter and a 31.5% growth compared with the same quarter of the year before.
The index for “hotels and restaurants” stood at 656.5, posting a 4.5% QOQ rise and a 38.3% YOY rise.
For “transportation, warehousing services and communications”, PPI stood at 538, registering a 5.5% increase QOQ and 32.4% YOY.
For “financial brokerage (insurance)”, it was at 381.8, indicating a 1.8% rise compared with the previous quarter and a 23% increase compared with the same quarter of the year before.
“Real estate, renting and business” saw the PPI stand at 270.1, registering a 3.2% QOQ rise and a 15.1% YOY increase.
For “education”, the index was at 3,371, posting a 0.7% rise compared with the previous quarter and a 20% increase compared with the same quarter of the year before.
“Health services and social work” had a PPI of 568.1, indicating a 4.4% rise over the preceding quarter and a 26% increase over the same quarter of the year before.
The PPI measured for the subsector of “other public, social and personal services” stood at 426.4, showing a 5.4% growth compared with the previous quarter and a 26.9% increase over the same quarter of the year before.
PPI Decline in 1st Iranian Month
A decrease of 2.4 percentage point was registered in the Producer Price Index for the Iranian month ending April 19 compared with the preceding month (Feb. 20-March 19), according to Governor of the Central Bank of Iran Abdolnasser Hemmati.
The monthly producer inflation declined from 1.6% in the month ending March 19 to -0.8% in the month ending April 19.
Year-on-year producer inflation reached 20.9% for the month under review, indicating a 2.9 percentage point decline compared with that of the month before, Hemmati was quoted as saying by the CBI website.
"Given the forward-looking nature of PPI, a decrease in Consumer Price Index and inflationary expectations would be down the line," he added.
The importance of PPI lies in its predictive content for the future pattern of Consumer Price Index. Changes in PPI are usually reflected in CPI within a short period of time.
PPI gauges the price fluctuations of goods and services for the producer whereas CPI measures changes in the price level of a basket of consumer goods and services purchased by households.
In other words, PPI is an index of prices measured at the wholesale, or producer level. It shows trends within the wholesale markets (as it was once called the Wholesale Price Index), production industries and manufacturing industries and commodities markets from the perspective of the seller.
According to Investopedia, PPI can serve multiple roles in improving investment-making decisions because it can serve as a leading indicator of CPI.
When producers face input inflation, rising costs are passed along to the retailers and eventually to the consumer.
Furthermore, PPI presents the inflation picture from a different perspective than CPI. Although changes in consumer prices are important for consumers, tracking PPI allows one to determine the cause of the changes in CPI.
If, for example, CPI increases at a much faster rate than PPI, such a situation could indicate that factors other than inflation may be causing retailers to increase their prices.
However, if CPI and PPI increase in tandem, retailers may be simply attempting to maintain their operating margins.
All in all, a decline in PPI is one of the signs of a probable slowdown in CPI in future months. Almost a perfect correlation exists between CPI and PPI.
