The average annual inflation gap measured by the Statistical Center of Iran among income deciles stood at 9.6% in the tenth month of the current calendar year (Dec. 22-Jan. 20), up 0.3 percentage points on the previous month.
The inflation gap in “food, beverages and tobacco” group among income deciles grew 0.3 percentage points and that of “non-food and services” group declined by 0.3 percentage points from the previous month.
Average goods and services Consumer Price Index in the 12-month period ending Jan. 20 jumped 53.2% for the first decile (the lowest income) and 43.7% for the 10th decile (the highest income).
Annualized inflation of “food, beverages and tobacco” stood at 68.9% for the first decile and 64.3% for the 10th decile. “Non-food and services” inflation was reported at 34.3% for the first decile and 38.1% for the 10th.
Average annual inflation rates stood at 51.4% for the second decile compared to last year’s corresponding period; 49.7% for the third decile; 48.8 for the fourth; 47.8% for the fifth; 47.1% for the sixth; 46.3% for the seventh; 45.3% for the eighth and 44.8% for the ninth decile.
The highest overall CPI (using the Iranian year to March 2017 as base year) was 630.4 for the tenth decile and the lowest was 586.6 for the sixth decile.
The first decile saw a month-on-month inflation of 3.2%, the second and third deciles each 3.3%, the third decile 3.4%, the fourth decile each saw a month-on-month inflation of 3.4%, the fifth decile 3.5%, the sixth decline 3.6%, the seventh decile 4%, the eighth decile 4.4%, the ninth saw MOM inflation of 5.3% and the 10th decile 6.9%.
The year-on-year inflation rates stood at 53.2% for the first decile, 51.4% for the second, 49.7% for the third, 48.8% for the fourth, 47.8% for the fifth, 47.1% for the sixth, 46.3% for the seventh, 45.3% for the eighth, 44.8% for the ninth and 43.7% for the 10th decile.
*** Inflation at Record High
Irrespective of income deciles, the average annualized inflation in the month under SCI review hit a record high of 46.3%. Only in 1995-96 and 1996-97 Iranian fiscal years did the country see inflation rates galloping above the current level.
Notably, this is the eighth consecutive month that the annualized inflation is rising after the government announced its so-called “economic surgery” by abolishing the heavily subsidized import of essential goods.
The general goods and services Consumer Price Index (using the Iranian year to March 2017 as base year) stood at 587.4 in the month under review, indicating a month-on-month rise of 4.3% and a year-on-year rise of 51.3%.
Among 12 groups of goods and services reviewed by SCI, the highest and lowest annualized inflation rates were respectively registered for “hotels and restaurants” with 75.1% and “communications” 8.8%.
The highest and lowest MOM inflation rates were for “transportation” with 11.9% and “education” with 0.3% month-on-month, respectively.
“Hotels and restaurants” with 78.4% and “communications” with 12.8% saw the highest and lowest YOY inflation. The CPI hit 578.5 for urban households and 637.1 for rural households, indicating a month-on-month increase of 4.3 and 4.3%, respectively.
The SCI put the annualized inflation for urban and rural areas at 45.5% and 50%, respectively. Year-on-year inflation was 50.6% for urban areas and 54.9% for rural areas in the month.
Notably, the CPI of “food and beverages” stood at 870.4 in the month ending Jan. 20, indicating a 4.1% increase from the previous month. The index registered a YOY increase of 70.1% and the CPI of the group increased by 65.7% in the 12-month period to Jan. 20 from the corresponding period last year.
The 12 groups of the basket of consumer goods and services surveyed by the SCI include "food & beverage" with a coefficient of 26.64%, "tobacco" 0.59%, "clothing and footwear" 4.78%, “housing and utilities" 35.5% (highest), "furniture, home appliances and maintenance" 3.93%, "health and treatment" 7.14%, "transportation" 9.41%, "communications" 2.87%, "leisure and culture" 1.65%, "education" 1.86%, "hotels and restaurants" 1.44%, and "miscellaneous items and services" 4.18%.
*** Consequences of Ending Import Subsidies
Rise in the prices of goods and services accelerated at speeds unseen in modern Iranian history after the government decided to overhaul the import subsidy system.
The government move saw the end of the costly and controversial practice of allocating cheap dollars at the rate of 42,000 rials/dollar, 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.
The market value of the dollar is currently in the range of 440,000 rials.
“So far we have been paying to producers [read importers] but now the subsidies go to consumers. In fact, the preferential foreign currency has not ceased, rather the allocation mechanism has changed,” President Ebrahim Raisi said in a TV speech on the eve of the introduction of the move in May last year.
In his speech, Raisi said that the end of cheap currency allocation will not lead to a price rise in wheat, flour and medicine. However, the move has led to a dramatic rise in the prices of essential goods and medicine. In fact, the prices of all goods and services have exploded in a ripple effect.
Also known as necessity or basic goods, essential goods are products consumers will buy, regardless of changes in income levels.
