Industries PPI Inflation at 23.8% in Q1

EghtesadOnline: The Producer Price Index of the industrial sector in the four-quarter period ending June 20, which marks the end of the third month of the current Iranian year, grew by 23.8% compared with the same period of the year before.

News ID: ۷۵۰۹۰۰

06 September 2020

The sector’s PPI for the four-quarter period to March 19, 2020, which marked the end of Q4 of the last Iranian year, had increased by 41.8%.

The overall PPI of the industrial sector stood at 587.7 in Q1, indicating an 8.1% increase compared with the previous quarter and 7.8% growth over the same quarter of the year before.

The sector’s quarterly and year-on-year PPI for the quarter to March 19, 2020, had increased by 1.8% and 13.3%, respectively.

According to the Statistical Center of Iran, the lowest quarterly PPI inflation rates were recorded for “coal production industries-oil refineries” subsector with -1.8% and “chemical industries” with 2.8% in Q1.

The highest quarterly PPI inflation rates were posted for “manufacturing of office machinery” with 38%, “manufacturing of transportation vehicles” with 34% and “production of paper and related products” with 23%.

The lowest year-on-year PPI inflation rate was registered for “coal production industries-oil refineries” subsector with -21.8% and the highest increase was posted by “manufacturing of office machinery” with 89.7% compared with the same quarter of the year before.

The lowest annual PPI inflation was recorded by “coal production industries-oil refineries” with 4.2% and the highest increase was reported for “manufacturing of office machinery” with 112.1%, “print and publication of recorded media” with 69.2% and “production of motor vehicles, trailers and semi-trailers” with 62.4%.

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

Latest data released by the Statistical Center of Iran show the average goods and services Consumer Price Index in the 12-month period ending August 21, which marks the end of the fifth Iranian month, increased by 25.8% compared with the corresponding period of last year, latest data released by the Statistical Center of Iran show.

SCI had put the average annual inflation rate for the preceding Iranian month, which ended on July 21, at 26.4%.

The consumer inflation for the month under review (July 22-August 21) registered a year-on-year increase of 30.4% compared with the similar month of the previous Iranian year. The year-on-year inflation of the month ending July 21 has been put at 26.9%.

The overall CPI (using the Iranian year to March 2017 as the base year) stood at 235.9 in the month under review, indicating a 3.5% rise compared with the month before.

SCI put average annual inflation for urban and rural areas during the month under review at 25.9% and 25.4%, respectively.

CPI registered a year-on-year increase of 30.6% for urban areas and 29.6% for rural areas in the month ending Aug. 21.

The overall CPI reached 234.7 for urban households and 242.5 for rural households, indicating a month-on-month increase of 3.5% and 3.2% for urban and rural areas, respectively.