The Statistical Center of Iran has released a new report on inflation in the first month of the current Iranian year (started March 21).
According to the latest data, the annualized inflation for the month under review (Farvardin) stood at 47.6%, up from 45.8% in the month before (a 1.8% rise).
The Consumer Price Index was reported at 180.5, indicating a 55.5% rise compared to the same month of the year before.
The year-on-year inflation saw a 1.5% rise compared to the month before.
SCI had earlier said the month-on-month inflation stood at 3.7% in Farvardin, down from 4.7% in the previous month (the last month of the preceding Iranian year).
The new data also show Lorestan Province with 56.9% saw the highest annualized inflation in Farvardin, followed by Yazd with 56.6% while Tehran with 43.7% registered the lowest rate followed by Fars with 44.4% among Iran’s 31 provinces.
In terms of year-on-year CPI rise, “hotels and restaurants” with 85.6 saw the highest among 12 groups of goods and services, followed by “food and beverages” with 78.5%. The lowest rate here was recorded for “communications” with 21.9 and “education” with 34.1%.
Among 20 groups of goods and services, in terms of month-on-month CPI rise, “fruit (fresh and dried) and nuts” saw the highest rate of 15.3%, followed by “transportation” with 8.6%. The lowest rate here was registered for “education” and dairy products and eggs with 0.3% each.
The report goes on to survey inflation felt by different income deciles. The YOY inflation was highest for first and second deciles (the first two poorest households) with 57.4% and 57.5% respectively, and lowest for the 7th decile with 55%.
In terms of MOM inflation, it was highest for the 10th decile with just over 4% and lowest for the first decile with just above 3%.
Delayed Publishing
After weeks of delay, the Statistical Center of Iran finally published data on inflation rate in the last fiscal year (March 2022-23) earlier this month.
The new report was simultaneously published together with inflation in the first month of the new year, yet the new data had a different format from previous such reports, and also revised down the inflation rates for previous rounds published on a monthly basis. The coefficients for the 12 categories of surveyed goods and services were also changed.
It said last year’s inflation rate stood at 50.6 in rural areas and 45% in urban areas.
“The official explanation [for the delay] is that SCI is in the process of changing the base year for CPI from 1395 [2016] to 1400 [2021]. Five-year updates are normal and necessary, because the expenditure weights used to calculate the CPI change over time,” said economist Djavad Salehi Isfahani on his weblog recently.
“Presumably, they are being recalculated using the household budget survey for 1400, which was concluded a year ago. Has there not been enough time to estimate the new weights?”
CBI Rivalry
The SCI report came after the Central Bank of Iran said the country experienced an average annual inflation rate of 46.5% in the last fiscal year that ended on March 20, 2023.
The CBI said the Consumer Price Index stood at 794.3 in the 12th month of the year, indicating a 6.6% rise compared to the previous month.
The bank did not report on the year-on-year inflation in the 12th month.
The bank surveys CPI for 12 groups of goods and services. Notably, the “food and beverages” group saw 54.6% in annualized inflation.
“Transportation”, “health and medical care”, “clothing and shoes”, “home appliances and services”, “communications”, “entertainment and cultural affairs”, “education”, “restaurant and hotel”, “tobacco”, “housing and utilities (water, electricity, gas and other fuel)” and “miscellaneous goods and services” registered 32.3%, 41.9%, 45.9%, 33.3%, 19.3%, 37.8%, 35.1%, 80%, 28.8%, 48.3% and 38.3% respectively.
“Housing and utilities” with 37.05%, “food and beverage” with 25.51% and “transportation” with 8.9% have the highest coefficient among the groups surveyed.
“Rivalry between the two government agencies [SCI and CBI] over inflation reporting has a history. CBI had stopped publishing its own inflation rates so as to not create confusion in the single most important economic statistic that the government puts out. For a long time, the two rates offered very similar trends, which presented no problem. If anything, it was reassuring to have two independent series tell the same inflation story. But, since 2018, for reasons that I do not know, the two urban CPI series began to diverge. In 2021, the CBI index exceeded SCI’s by 31%,” Isfahani said.
“Globally, food prices are on a decline, though Iran’s prices are more closely linked to the exchange rate, which has its own dynamic. In the meantime, all estimates of living standards, real wages and poverty rates may have to be recalculated. This is one revision that Iran can do without since the confusion that already exists over the status of Iran’s economy — collapsing or not — has confounded the public debate. Speaking of confusion, I am surprised to see that CBI’s estimate of economic growth in the first nine months of last year (March-December 2022) is higher than SCI’s (3.7% vs. 3.3%) despite CBI’s higher inflation estimate. True, the CPI and the GDP deflator measure different things, but still I expected the opposite,” he concluded.
‘Economic Surgery’
The rise in prices of goods and services accelerated at an unprecedented pace 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, in what was touted as “economic surgery”.
The market value of the dollar is currently above 500,000 rials.
“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 in May last year.
In his speech, Raisi emphasized that the removal of cheap dollar 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. In fact, the prices of all commodities and services have also risen suddenly in a ripple effect.
Also known as necessity or basic goods, essential goods are products consumers will buy, regardless of changes in income levels.
