The average Producer Price Index for the services sector in the four-quarter period ending June 20 increased by 27.6% 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 March 19, marking the end of Q4 of last Iranian year, had increased by 29% year-on-year.
The overall PPI for the services sector (using 2011 as the base year) stood at 440.3 in the first quarter of the current fiscal year (March 20-June 20), indicating a 6.7% increase compared with the preceding quarter and a 26.6% rise compared with last year's same quarter.
Services PPI is based on the indexes of eight subsectors, namely “repairing motor vehicles, motorcycles and home devices” with a coefficient of 2.5%, “hotels and restaurants” with the coefficient of 4.8%, “transportation, warehouse services and communications” with a coefficient of 29.6%, “brokerage (insurance) services” with a coefficient of 1.9%, “real estate, renting and business” with a coefficient of 39%, “education” with a coefficient of 12.3%, “health services and social work” with a coefficient of 5.8%, and “other public, social and personal services” with a coefficient of 4.1%.
PPI for “repairing motor vehicles, motorcycles and home devices” stood at 584.5, indicating a 10.1% rise compared with the previous quarter and a 35.6% growth compared with the same quarter of last year.
The index for “hotels and restaurants” stood at 706.8, posting a 7.7% rise quarter-on-quarter and a 31.1% rise year-on-year.
For “transportation, warehousing services and communications”, PPI stood at 584.2, registering an 8.6% increase QOQ and 34% increase YOY.
It was at 437.1 for “financial brokerage (insurance)”, indicating a 14.5% rise compared with the previous quarter and a 19.1% increase compared with the same quarter of last year.
“Real estate, renting and business” saw PPI stand at 283.6, registering a 5% rise QOQ and 15.7% increase YOY.
For “education”, the index was at 337.6, posting a 1.8% rise compared with the previous quarter and a 21.8% increase compared with the same quarter of the year before.
“Health services and social work” had a PPI of 607.7, indicating a 7% rise over preceding quarter and 31.1% increase over the same quarter of last year.
PPI measured for the subsector of “other public, social and personal services” stood at 448.5, showing a 5.2% growth compared with the previous quarter and a 26.4% increase over the same quarter of the year before.
The services sector employed 49.7% of the Iranian employed population (11.4 million) in Q1, 0.1% more than the corresponding period of last year.
The services sector employed 9.24 million men and 2.15 million women in the three-month period. It accounted for 59.4% or 10.09 million of all jobs in urban areas and 22% or 1.31 million of jobs in rural areas.
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 are faced with input inflation, those rising costs are passed along to the retailers and eventually to the consumer.
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 decrease 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.
