The average goods and services Consumer Price Index of “food and beverages” in the 12-month period ending May 21, which marks the end of the second Iranian month of fiscal 2021-22, increased by 47.8% compared with last year’s corresponding period.
With a coefficient of 26.64%, the CPI of the group stood at 391.8 in the month ending May 21, indicating a 0.9% decrease compared with the month before.
The index registered a year-on-year increase of 61.5%, latest data released by the Statistical Center of Iran show.
Apart from “food and beverages”, the 12 groups of the basket of consumer goods and services purchased by households surveyed by the SCI include “tobacco" with a coefficient of 0.59%, "clothing and shoes" with 4.78%, "housing, water, electricity, natural gas and other fuels" with 35.5% (highest), "furniture, home appliances and their maintenance" with 3.93%, "health and treatment" with 7.14%, "transportation" with 9.41%, "communications" with 2.87%, "leisure and culture" with 1.65%, "education" with 1.86%, "hotels and restaurants" with 1.44% and "miscellaneous items and services" with a coefficient of 4.18%.
The overall average goods and services Consumer Price Index in the 12-month period ending May 21, increased by 41% compared with the corresponding period of the year before.
The consumer inflation for the month under review (April 21-May 21) registered an increase of 46.9% compared with the similar month of the previous Iranian year.
The overall CPI (using the Iranian year to March 2017 as the base year) stood at 308.4, indicating a 0.7% rise compared with the month before.
SCI put urban and rural 12-month inflation for the month under review at 40.5% and 43.2%, respectively.
CPI registered a year-on-year increase of 46.1% for urban areas and 51% for rural areas in the month ending May 21.
The overall CPI reached 304.9 for urban households and 327.8 for rural households, indicating a month-on-month increase of 0.7% for both.
The highest monthly growth in the index among 12 groups of the basket of consumer goods and services purchased by households in the Iranian month ending May 21 was recorded for “tobacco” group with 3.1% while “communications” group posted the deflation of 1.5%.
The highest year-on-year inflation in the month under review was posted for “furniture, home appliances and their maintenance” with 67.6% while the lowest YOY inflation was registered for “communication” group with 13.8%.
The highest and lowest annual inflation were registered for “transportation” with 65.1% and “communications” with 18.3%.
Prices of Household Staples to Increase Yet Again
With less than three months to go until the incumbent government remains in power, a new wave of increases in essential goods’ prices has started.
Vegetable oil and sugar factories have secured permission from the government to once again raise the prices of their products. That’s contrary to what Government Spokesman Ali Rabiei said recently: Any increase in consumer prices is banned in the first quarter of the current year (March 21-June 21).
According to a report by Persian daily Etemad, the prices of liquid cooking and frying oils have increased by 35% and hydrogenated vegetable oils’ prices have risen by 30% since May 16. Bread prices have also increased by 50% without an official announcement while the 72% increase in sugar price has been confirmed officially.
All this come as vegetable oil prices went through volatile periods of price increases and shortages in the last Iranian year. For example, some supermarkets conditioned the sale of a limited volume of hydrogenated vegetable oil on the customers’ presentation of National ID cards.
There were four periods of cooking oils’ price increases over the past year: on July 4, 2020, the Market Regulation Headquarters raised the consumer prices of this strategic commodity by 12-14%. On Nov. 21, 2020, prices of cooking oils packaged in PET containers jumped by 10% and those packaged in other types of containers by 13%. And, on Feb. 14, the Consumers and Producers Protection Organization approved the 13.8% rise in the prices of cooking oil packaged in tin-plated steel.
Sugar prices were also raised last year but in a covert manner. Sugar, which was sold at 87,000 rials per kilogram by wholesalers, is now being sold at 115,000 rials per kilogram. Retailers sell a kilogram of sugar at 150,000 rials (65 cents), though its government-mandate price is set at 66,500 rials (29 cents).
Command Economy
Vahid Shaqaqi-Shahri, an economist, believes that in a command economy, prices will never decrease; pricing measures taken by the governments to support consumers lose their efficacy after some time.
“The need for a large part of raw materials and machinery used in food production is met through imports and so their prices are inevitably determined by fluctuations of foreign exchange rate,” he said.
Referring to the wage-price spiral — a macroeconomic theory used to explain the cause-and-effect relationship between rising wages and inflation, he said, “The increase in prices of a product or service spills over to other parts of the economy. Teachers, taxi drivers and others must both provide and receive services; hence, price hikes would exert pressure on their living. Rising prices increase demand for higher wages, which lead to higher production costs and further upward pressure on prices.”
“Since last year, we’ve been witness to price hikes of all goods from clothes to housing to cars and now we are seeing the prices of strategic goods like bread, sugar and oil going ballistic. Low-income people’s living conditions are being affected by these price increases,” he said.
On the government’s approval of the rise in the prices of cooking oil, Shaqaqi-Shahri said, “The better part of raw materials to produce vegetable oils and fats are being imported. The constant rise in the value of US dollar has increased the production costs of processed oil. A huge rent-seeking opportunity opened up since the government introduced its subsidized imports policy. The government tried to prevent price increases and shortage through the allocation of subsidized currency at the rate of 42,000 rials per US dollar to import essential goods, but we saw that, for instance, the supply of meat, eggs, chicken and now cooking oil has been an issue of concern due a lack of coordination among production, import and distribution systems.”
