SCI Reviews Iran's Q1 PPI Changes

EghtesadOnline: The Statistical Center of Iran has released a report reviewing changes in Producer Price Index during the first quarter of the current Iranian year (March 21 to June 21).

News ID: ۷۴۸۳۳۰

02 September 2019

According to the report, the overall PPI (using 2011 as the base year) stood at 471.4 in spring, indicating a 14.4% increase compared with the previous quarter’s index and a 69.5% growth over the same quarter of last year.

Producer inflation in the four-quarter period ending June 21 (annual inflation) grew by 58.6% compared with the same period of last year. The index calculated for the four-quarter period ending March 20, 2019, marking the end of the Q4 of last year, increased by 47.5%.

Agriculture

The overall PPI for the agriculture sector with a coefficient of 13.15% stood at 541.2 in Q1, registering a 35.5% increase compared with the previous quarter’s index and an 83.2% rise over the same quarter of last year, Financial Tribune reported.

Producer inflation in the year ending June 21 grew by 66.6% compared with the same period of last year. The index calculated for this period increased by 48.8%.

Mining

The overall PPI for the mining sector with a coefficient of 1.02% stood at 474.6 in Q1 of the current Iranian year, posting a 16.9% growth compared with the previous quarter’s index and a 64.3% rise over the same quarter of last year.

Producer inflation in the four-quarter period ending June 21 grew by 58.9% year-on-year. The index calculated for the period ending March 20, 2019, increased by 50.9%.

Industry

The overall PPI for the industrial sector with a coefficient of 51.47% stood at 545.4 in the Q1 of current Iranian year, registering a 13.7% increase compared with the previous quarter’s index and an 88.7% rise over the same quarter of last year.

Producer inflation in the four-quarter period ending June 21 grew by 77.2% year-on-year. The index calculated for the period ending March 20, 2019, increased by 64.6%.

Electricity

The overall PPI for electricity, with a coefficient of 2.02%, stood at 110.1 in the Q1 of current Iranian year, registering a 4.2% decrease compared with the previous quarter’s index and a 17.3% decline year-on-year.

Producer inflation in the four-quarter period ending June 21 declined by 2.2% compared with the same period of last year. The index calculated for the period ending March 20, 2019, increased by 4.7%.

Services

The overall PPI for services sector with a coefficient of 32.34% stood at 347.8 in the Q1 of current Iranian year, registering a 5.9% increase quarter-on-quarter and a 32.6% rise over the same quarter of last year.

Producer inflation in the year ending June 21 grew by 27.3% compared with the same period of last year. The index calculated for the four quarters increased by 22.2%.

PPI vs. CPI

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 the 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 (as it was once called the Wholesale Price Index) and commodities markets, as well as production and manufacturing industries 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.

PPI presents the inflation picture from a perspective other 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 SCI report, the average goods and services CPI in the 12-month period ending Aug. 22 increased by 42.2% compared with last year’s corresponding period.

SCI had put the average 12-month inflation rate for the preceding Iranian month, which ended on July 22 at 40.4%.

Consumer prices registered a year-on-year increase of 41.6% in the Iranian month ending Aug. 22 compared with the similar month of last year.

The overall CPI (using the Iranian year to March 2017 as the base year) stood at 180.8 in the same month, indicating a 0.6% rise compared with the previous month.

Year-on-year and annual consumer price inflation measured for rural areas indicate rates higher than those of urban areas.

The index registered a YOY increase of 40.8% for urban areas and 46.1% for rural areas compared with the similar month of last year.

The overall CPI reached 179.7 for urban households and 187.1 for rural households, indicating an increase of 0.7% for urban areas and 0.3% for rural areas compared with the previous month.

SCI put urban and rural 12-month inflation for the month under review at 41.4% and 46.6% respectively.