The goods and services Consumer Price Index (using the Iranian year to March 2017 as the base year) stood at 429.6 in the month ending May 21, indicating a 3.5% rise compared to the previous month, making it the highest in six months, new data released by the Statistical Center of Iran show.
Month-on-month consumer inflation was 3.3% in the preceding month.
The average CPI in the 12 months to May 21 increased by 38.7% compared with the corresponding period of the year before.
SCI had put the average annual inflation rate for the preceding Iranian month (ended April 20) at 39.2%.
Consumer price inflation for the month under review (April 21-May 21) jumped 39.3% over the same month of the previous fiscal year while year-on-year inflation in the month ending April 20 was 35.6%.
SCI put average inflation for urban and rural areas at 38.3% and 40.8%, respectively. CPI registered a YOY increase of 39.2% for urban areas and 40.1% for rural areas in the month.
Overall CPI reached 424.4 for urban households and 459.2 for rural households, indicating a month-on-month increase of 3.7% and 2.8%, respectively.
The highest and lowest 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 “food and beverages”, “hotels and restaurants” and “miscellaneous goods and services” with 6.7% each and education at 0.5% month-on-month.
The highest year-on-year inflation in the month under review was logged by “hotels and restaurants” with 61% while the lowest YOY inflation was registered by “communications” with 7.6%.
The highest and lowest annualized inflation rates were registered for “hotels and restaurants” with 61.1% and communications 4.8%.
Food and Beverages
With a coefficient of 26.64%, CPI for food and beverages stood at 586.1 in the month to May 21, indicating a 3.3% increase on the previous month. The index registered a YOY increase of 49.6% and the CPI of the group increased by 49.6% in the 12-month period to May 21 YOY.
Tobacco
The CPI for tobacco was 650.5, indicating a 3.8% rise from the month before. The tobacco index, which has the least impact on the total inflation rate with a coefficient of 0.59%, registered a YOY increase of 40.4%. The annualized CPI of the group grew by 35.3% compared with the corresponding period of the year before.
Clothing and Shoes
With a coefficient of 4.78%, the CPI for clothing and shoes reached 523.3, indicating a 3.9% increase over the earlier month. This index registered a YOY increase of 46.8% in the month under review. The average annual CPI of the group jumped by 49.7% from last year.
Housing and Utilities
The CPI of housing and utilities (water, electricity, natural gas and other fuels) stood at 283.8, indicating a 2.1% rise compared with the month before. The group’s CPI index, which has the biggest impact on the total inflation rate with a coefficient of 35.5%, registered a YOY increase of 29.6%. Annualized CPI of the group was at 26.9%.
Home Appliances, Furniture and Maintenance
With a coefficient of 3.93%, CPI for furniture, home appliances and their maintenance was 565 – up 3.3% on the previous month. The group’s CPI registered a YOY increase of 30% while the average annual CPI of the group increased by 40.4% over last year.
Health and Medical Treatment
The CPI of health and medical treatment was 334.6, indicating a 4.2% increase from the month before. This index, with a coefficient of 7.14%, registered an increase of 32.6% compared with the similar month of last year. The group’s annual inflation during the month was 36.6%.
Transportation
With a coefficient of 9.41%, the transportation CPI was 550.2, up 6.7% on the month before. This index registered a YOY increase of 42% and its annualized CPI increased by 36%.
Communications
The CPI of communications stood at 191, up 1.5% on the month before. With a coefficient of 2.87%, it showed a YOY increase of 7.6% while the annualized inflation reached 4.8%.
Leisure and Culture
The leisure and culture CPI stood at 521.8, indicating a 2.8% rise compared with that of the previous month. With a coefficient of 1.65%, it saw a YOY increase of 29.2% with annualized inflation near 35.3%.
Education
With a coefficient of 1.86%, the CPI for education was 272.9, indicating a 0.5% rise from the month before. The group’s CPI index registered a YOY increase of 27.5% while the annualized CPI of the group surged to 25.7%.
Hotels and Restaurants
The hotels and restaurants CPI came in at 509 – up 6.7% over the previous month. With a coefficient of 1.44%, the YOY increase was 61% and annualized inflation was at 61.1%.
Miscellaneous Goods and Services
The CPI of goods and services in the miscellaneous group was 465.2, indicating a 3.9% growth compared to the month before. With a coefficient of 4.18%, this index was up 33.2% and its average annual inflation hovered near 37.6%.
Subsidy Regime Overhaul and Inflationary Effect
The government recently decided to abolish the controversial practice of allocating cheap dollars at the rate of 42,000 rials per dollar, locally known as Preferential Foreign Currency Rate, to import essential goods, including corn, soymeal, unprocessed oil, oilseeds and barley, in addition to wheat, flour and medicine. Instead, it is depositing cash directly to the account of income deciles 1 to 9.
The market value of the dollar is presently above 300,000 rials.
A total of 23 million Iranian households constituting 72 million Iranians were entitled to the new payments, IRNA reported, citing the Subsidy Targeting Organization.
The Central Bank of Iran announced on Monday that more than 400 trillion rials (about $1.3 billion) were deposited to the account of those entitled to the subsidies.
“Until now, we have been paying to producers [read importers] but now the subsidies go to consumers. The Preferential Foreign Currency Rate has not been abolished; rather the allocation method has changed,” President Ebrahim Raisi said in a televised speech on the eve of the introduction of the move earlier this month.
In his speech, Raisi emphasized that the removal of cheap dollar allocation will not lead to a price rise in wheat, flour, medicine and gasoline. However, the move has led to a dramatic rise in the prices of essential goods.
Also known as necessity or basic goods, essential goods are products consumers will buy, regardless of changes in income levels.
The prices of other food products have also risen suddenly in a ripple effect.
For example, ice-cream and fruit juice prices jumped by 25% as of May 22.
“The prices of milk and sugar have experienced close to a twofold price increase. Yet, we could not double the prices because then people could not afford to buy ice-cream or fruit juice at all,” the head of Ice-Cream and Fruit Juice Union, Eskandar Azmoudeh, was quoted as saying by ILNA.
The official noted that since ice-cream and fruit juice are not considered essential goods like bread and rice or vegetable oil, many Iranian households are expected to remove them from their expenditure basket.
The two products last saw a price rise of 20% at the start of the current Iranian year (March 21).
“Some business owners have already been forced to lay off workers because there are fewer customers now, as there’s less work to do. We are worried that more workers will follow suit as a result of the new round of price increase,” Azmoudeh said.
Highest Inflation Over the Past Decade
The Economic Studies Department of Tehran Chamber of Commerce, Industries, Mines and Agriculture in a review of the decade ending fiscal 2021-22 said the country saw the highest inflation in the year at 40.2%.
Citing data from the Statistical Center of Iran and the Central Bank of Iran, the survey showed single-digit inflation was registered in only four years from the fiscal 1978-79 to fiscal 2021-22 (44 years since the revolution).
Over the years, figures reported by SCI and CBI on inflation tend to be incompatible.
After fiscal 1995-96 that had an inflation rate of 49.4%, the fiscal 2021-22 was the second year that saw the economy with an inflation rate of above 40%.
As the CBI-reported inflation in the fiscal 2019-20 was 41.2%, the economy suffered an inflation of over 40% in three years and 30-40% in two years.
In the 12th month of the fiscal 2021-22 (Feb. 20-March 20), the rate of monthly changes in the price index of consumer goods and services of households reached 1.3%, which was down over the previous month.
Year-on-year inflation in the month under review was 34.7% and during the 12 months to March 20 40.2%.
Inflation hit 42.8% for rural households in the fiscal 2021-22 and 39.7% for urban households.
A breakdown of major groups shows the food and beverages group was the biggest contributor to inflation in the fiscal 2021-22 with 16.7 percentage points followed by housing and utilities (water, electricity, natural gas and other fuels) with 6.6 percentage points, transportation 4.5 percentage points, clothing and shoes 2.7 percentage points, furniture, home appliances and their maintenance 2.4 percentage points and health and treatment 2.2 percentage points.
Prices rises in the energy group (water, electricity and fuel) in the fiscal 2021-22 compared to the previous year was 24.5% and its share in inflation was 0.7 percentage points.
The lowest CPI increase in the fiscal 2021-22 was for the communication services group with 6.4% and the lowest share of inflation was also in this group with 0.12 percentage points.
In the food and beverage sector, three commodity groups, namely bread and cereals, red meat and poultry, and vegetables, together accounted for about 50% of the 16.74 percentage-point share of the inflation in March 2021-22.
The highest contribution to inflation was from non-durable goods with 21.4 percentage points.
