New data released by the Statistical Center of Iran confirms inflation has reached an unprecedented level.
Food prices increased by 25.9% in the third month of the current Iranian year (May 22-June 21) compared to the previous month.
The record high monthly inflation came after the government decided to overhaul the import subsidy system.
The government move saw the abolition of the controversial practice of allocating cheap dollars at the rate of 42,000 rials per dollar, locally known as the Preferential Foreign Currency, 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 above 300,000 rials now.
“Until now, we have been paying to producers [read importers] but now the subsidies go to consumers. In fact, the Preferential Foreign Currency has not been ceased, rather the allocation method has changed,” President Ebrahim Raisi said in a televised speech on the eve of the introduction of the move last 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 petrol.
However, the move has led to 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.
Meanwhile the prices of all commodities have also risen suddenly in a ripple effect.
The general goods and services Consumer Price Index (using the Iranian year to March 2017 as the base year) stood at 482.1 in the month to June 21, indicating a 12.2% rise compared to the previous month.
This is the highest monthly price rise on record in SCI’s database (since 2018).
Month-on-month consumer inflation was 3.5% in the preceding month.
The average CPI in the 12 months to June 21 increased by 39.4% compared with the corresponding period of the year before.
SCI had put the average annual inflation rate for the preceding Iranian month (ended May 21) at 38.7%.
Consumer price inflation for the month under review jumped 52.5% over the same month of the previous fiscal year while year-on-year inflation in the month ending May 21 was 39.3%.
SCI put average inflation for urban and rural areas at 38.9% and 41.8%, respectively while CPI registered a YOY increase of 51.4% for urban areas and 58.2% for rural areas in the month.
CPI reached 473.2 for urban households and 531.9 for rural households, indicating a month-on-month increase of 11.5% and 15.8%, 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 June 21 was recorded for “food and beverages” with 25.9% and “education” at 1.1% month-on-month.
The highest year-on-year inflation in the month under review was logged by “hotels and restaurants” with 86.4% while the lowest YOY inflation was registered by “communications” with 9.8%.
The highest and lowest annualized inflation rates were registered for “hotels and restaurants” with 63.7% and communications with 4.7%.
Food and Beverages
With a coefficient of 26.64%, CPI for food and beverages stood at 738.1 in the month to June 21, indicating a 25.9% increase from the previous month. The index registered a YOY increase of 82.6% and the CPI of the group increased by 52% in the 12-month period to June 21 YOY.
Tobacco
The CPI for tobacco was 678.8, indicating a 4.3% 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 43.9%. The annualized CPI of the group grew by 35.4% 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 552.5, indicating a 5.6% increase over the earlier month. This index registered a YOY increase of 48.7% in the month under review. The average annual CPI of the group jumped by 49.1% from last year.
Housing and Utilities
The CPI of housing and utilities (water, electricity, natural gas and other fuels) stood at 291.7, indicating a 2.8% rise compared with the previous month. 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 31.4%. Annualized CPI of the group was at 27.2%.
Home Appliances, Furniture and Maintenance
With a coefficient of 3.93%, CPI for furniture, home appliances and their maintenance was 599.4 – up 6.1% on the previous month. The group’s CPI registered a YOY increase of 34.7% while the average annual CPI of the group increased by 38.3% over last year.
Health and Medical Treatment
The CPI of health and medical treatment was 354.5, indicating a 6% increase from the month before. This index, with a coefficient of 7.14%, registered an increase of 36.9% compared with the similar month of last year. The group’s annual inflation during the month was 36.2%.
Transportation
With a coefficient of 9.41%, the transportation CPI was 570.4, up 3.7% on the month before. This index registered a YOY increase of 43.1% and its annualized CPI increased by 35.8%.
Communications
The CPI of communications stood at 193.5, up 1.3% on the month before. With a coefficient of 2.87%, it showed a YOY increase of 9.8% while the annualized inflation reached 4.7%.
Leisure and Culture
The leisure and culture CPI stood at 542.7, indicating a 4% rise compared with that of the previous month. With a coefficient of 1.65%, it saw a YOY increase of 31.5% with annualized inflation near 33.7%.
Education
With a coefficient of 1.86%, the CPI for education was 275.8, indicating a 1.1% rise from the month before. The group’s CPI index registered a YOY increase of 28.1% while the annualized CPI of the group surged to 26%.
Hotels and Restaurants
The hotels and restaurants CPI came in at 606.7 – up 19.2% over the previous month. With a coefficient of 1.44%, the YOY increase was 86.4% and annualized inflation was at 63.7%.
Miscellaneous Goods and Services
The CPI of goods and services in the miscellaneous group was 490.3, indicating a 5.4% growth compared to the month before. With a coefficient of 4.18%, this index was up 36.3% and its average annual inflation hovered near 36.6%.
