The average Producer Price Index for the mining sector in the last fiscal year (ended March 20, 2019) increased by 50.9% compared with the year before to reach 349.9 (using 2011 as the base year).
According to the Statistical Center of Iran, producer inflation for “extraction of copper ores” stood at 197.1, indicating a 91.5% rise YOY—the highest inflation among the mining sector's subgroups.
PPI of “extraction of iron ores” increased 61.9% year-on-year to reach 471.6, while that of “ornamental ores extraction” grew 21% YOY to hit 270.5.
Producer inflation for “extraction of coal” subsector stood at 352.2, indicating a 33.4% rise compared with the year before, while it reached 321.1 for “extraction of gravel and sand”, indicating a 24.3% rise YOY.
And, producer price index of “chromite ore extraction” grew 32.6% compared with the year before to reach 418.
The overall PPI of the mining sector (using 2011 as the base year) stood at 405.9 in Q4 (Dec. 22, 2018-March 20), indicating a 6.7% increase compared with the previous quarter and 60.7% growth over the same quarter of the previous year.
The “extraction of metal ores” subsector had the biggest impact by registering a 6.7% rise in producer inflation of mining sector in Q4. It increased by 7.5% compared with the preceding quarter to reach 440 from 409.2 of Q3.
The mining sector’s average PPI for the four-quarter period to Dec. 21, end of Q3, had increased by 41.9% year-on-year.
The importance of PPI lies in its predictive content for the future pattern of Consumer Price Index. Changes in PPI are usually reflected in CPI within a short period of time.
PPI gauges price fluctuations of goods and services for the producer whereas CPI measures changes in the price level of a basket of consumer goods and services purchased by households.
In other words, PPI is an index of prices measured at the wholesale, or producer level. It shows trends within the wholesale markets (as it was once called the Wholesale Price Index), manufacturing industries and commodities markets from the perspective of the seller.
According to Investopedia, PPI can serve multiple roles in improving investment-making decisions because it can serve as a leading indicator of CPI.
When producers are faced with input inflation, those rising costs are passed along to the retailers and eventually to the consumer.
Furthermore, PPI presents the inflation picture from a different perspective than CPI. Although changes in consumer prices are important for consumers, tracking PPI allows one to determine the cause of the changes in CPI.
If, for example, CPI increases at a much faster rate than PPI, such a situation could indicate that factors other than inflation may be causing retailers to increase their prices.
However, if CPI and PPI increase in tandem, retailers may be simply attempting to maintain their operating margins.
All in all, a decrease in PPI is one of the signs of a probable slowdown in CPI in future months. Almost a perfect correlation exists between CPI and PPI.
According to the Statistical Center of Iran, the goods and services Consumer Price Index in the 12-month period ending March 20, which marks the end of last fiscal year, increased by 26.9% compared with last year’s corresponding period.
