Rich-Poor Inflation Gap at 8.1%

EghtesadOnline: The average annual inflation gap measured by the Statistical Center of Iran among income deciles stood at 8.1% in the seventh Iranian month (Sept. 22-Oct. 21), indicating a 1.6 percentage point increase compared with the previous month.

News ID: ۷۵۱۳۶۶

29 October 2020

The inflation gap in “food, beverages and tobacco” group among income deciles increased by 1.2 percentage points and that of “non-food and services” group widened by 2.8 percentage point compared with the previous month, SCI reported on its website.

The average goods and services Consumer Price Index in the 12-month period ending Oct. 21 increased by 24.4% for the first decile (those with the lowest income) while it grew by 32.5% for the 10th decile (those with the highest income).

The “food, beverages and tobacco” group inflation increased 23.4% for the first decile and 21.1% for the 10th group. “Non-food and services” group inflation grew 25.5% for the first decile and 35.5% for the 10th group.

Average inflation rates grew by 25% for the second decile compared with last year’s corresponding period; 25.3% for the third decile; 25.5% for the fourth decile; 25.8% for the fifth decile; 26.2% for the sixth decile; 27% for the seventh decile; 27.7% for eighth decile and 29.3% for the ninth decile.

The highest overall CPI (using the Iranian year to March 2017 as the base year) stood at 295.7 for the 10th decile and the lowest was 249.7 calculated for the first decile. The first, second, third and fifth deciles registered a 6% month-on-month inflation growth. Monthly inflation growth was 5.9% for the fourth decile, 6.2% for the sixth decile, 6.7% for the seventh decile, 7.1% for the eighth decile, 8.4% for the ninth decile and 10.6% for the 10th decile.

The year-on-year inflation rates increased by 37.2% for the first decile during the month under review, 37.7% for second, 37.8% for third and fourth, 38.1% for fifth, 38.7% for sixth, 40.9% for seventh, 42.7% for eighth, 47.6% for ninth and 57.1% for the 10th decile.

Income deciles are groupings that result from ranking either all households or all persons in the population in the ascending order according to income and then dividing the population into 10 groups, each comprising approximately 10% of the estimated population.

According to Javad Hosseinzadeh, the head of the Statistical Center of Iran, the bigger share of durable goods (automobiles, household goods, etc.) in the consumer basket of high-income deciles is one of the reasons behind the inflation gap between income deciles.

Noting that the gap between income deciles began to rise since the Iranian month ending Dec. 21, 2019, the official recently said food, beverages and tobacco account for 43.3% and non-food and services constitute 56.7% of the consumer basket of the first decile (those with the lowest income) while food, beverages and tobacco make up 17% and non-food and services constitute 83% of the consumer basket of the 10th decile (those with the highest income).

“The Consumer Price Index examines the weighted average of prices of a basket of consumer goods and services; both weights and prices are very important. Price changes in non-food and services would have a bigger impact on CPI than food. In fact, non-food and services drive up the inflation rate for the 10th decile compared with the average rate,” Hosseinzadeh was quoted as saying by ILNA.

The SCI chief noted that the increase in foreign exchange rate also had a bigger impact on the prices of durable goods taht are mostly imported.

“The year-on-year inflation rate for items such as refrigerators and home appliances stood at 92.2% compared with 30.9% for non-durable goods and 39.3% for semi-durable goods [that differ from a non-durable goods in that they can be used repeatedly or continuously over a period longer than a year and differ from a durable good in that their expected lifetime of use, though longer than a year, is often significantly shorter]. Year-on-year services inflation was 27.4% and the overall inflation of these goods was put at 39.5%,” he said.

Hosseinzadeh also said the rise in gasoline prices has also impacted the index, given the higher consumption of fuel in high-income households and the number of cars they own.