Iran’s industrial sector is coming under mounting strain as producer price inflation continues to accelerate, pointing to stronger inflationary spillovers for consumers in the months ahead.
The latest figures released by the Statistical Center of Iran indicate that price pressures along the production chain intensified markedly in autumn 1404 (September–December 2025), reflecting a combination of rising input costs, macroeconomic instability and persistent structural constraints.
According to the report, the Producer Price Index (PPI) for the industrial sector reached 349.8 in autumn 1404. On a quarterly basis, producer inflation stood at 11.7%, up sharply from 8.2% in summer 1404 (2025).
On a year-on-year basis, industrial producer inflation climbed to 50.9%, while the annual average inflation rate reached 44.5%, compared with 38.3% in the previous quarter. Together, these indicators confirm a clear acceleration of inflation in the industrial sector and suggest that cost pressures are becoming more persistent rather than temporary.
The PPI is a key leading indicator for consumer inflation, as it captures price changes at the producer level before they are transmitted to final markets.
In the current economic environment, characterized by exchange-rate volatility, tighter international sanctions and shifts in currency policy, the sharp rise in industrial producer inflation serves as a serious warning. Higher production costs are increasingly likely to be passed on to consumers, especially in sectors with limited price controls and high import dependency.
Importantly, the autumn data do not yet reflect the full impact of the removal of the preferential exchange rate, which was implemented in Dey 1404 (January 2026).
However, the simultaneous surge in the exchange rate suggests that inflationary pressures on consumer prices will intensify further in the coming months.
Early evidence of this trend has already emerged. In Dey 1404 (January 2026), food inflation reached exceptional levels, with point-to-point inflation in the food group approaching 90% and monthly inflation rising to a historic high of 13.7%, underscoring the speed at which producer-side shocks are being transmitted to household consumption.
A particularly concerning aspect of the current situation is that rising inflation is occurring alongside continued stagnation in industrial activity.
Purchasing Managers’ Index data show that Iran’s manufacturing sector remained in contraction for seven months during 1404 (2025), with the index staying below the 50 threshold through Azar (December 2025). Operating below capacity has increased average unit costs for firms, as fixed expenses are spread over lower output volumes, thereby reinforcing producer inflation.
Energy shortages have further exacerbated these pressures. Recurrent disruptions in electricity and gas supply have forced many industrial firms to either secure alternative energy sources at significantly higher costs or scale back production. These higher energy expenses are directly reflected in final prices, compressing profit margins and intensifying cost-push inflation across the sector.
Without effective policy interventions, these dynamics risk deepening industrial stagnation while further eroding household purchasing power.
