SCI: Rich-Poor Inflation Gap at 8.9%

EghtesadOnline: The average annual inflation gap measured by the Statistical Center of Iran among income deciles stood at 8.9% in the eighth Iranian month (Oct. 22-Nov. 20), indicating a 0.8 percentage point increase compared with the previous month.

News ID: ۷۵۱۵۸۷

26 November 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 2.4 percentage point compared with the month before.

The average goods and services Consumer Price Index in the 12-month period ending Nov. 20 increased by 26.3% for the first decile (those with the lowest income) while it grew 35.2% for the 10th decile (those with the highest income), ILNA reported.

“Food, beverages and tobacco” group inflation increased by 26.6% for the first decile and 23.1% for the 10th group, while “non-food and services” group inflation grew by 25.9% for the first decile and 38.3% for the 10th group.

Average inflation rates grew by 26.8% for the second decile compared with last year’s corresponding period, 27.1% for the third decile, 27.2% for the fourth decile, 27.4% for the fifth decile, 27.8% for the sixth decile, 28.8% for the seventh decile, 29.5% for eighth decile and 31.5% for the ninth decile.

The highest overall CPI (using the Iranian year to March 2017 as the base year) stood at 302.4 for the 10th decile and the lowest was 270.8 for the first decile. The first decile registered an 8.4% month-on-month inflation, second 7.7%, third 7.2%, fourth 6.8%, fifth 6.4%, sixth 6%, seventh 5.4%, eighth 4.8%, eighth 4.8%, ninth 3.9% and 10th 2.3%.

The year-on-year inflation rates increased by 46% for the first decile during the month under review, 45.7% for second, 45.3% for third, 44.9% for fourth and sixth, 44.8% for fifth, 46.4% for seventh, 47.4% for eighth, 51% for ninth and 58% 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.

Inflation Irrespective of Deciles

The overall average goods and services Consumer Price Index in the 12-month period ending Nov. 20, which marks the end of the eighth Iranian month, increased by 29% 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 Oct. 21, at 27.2%.

The consumer inflation for the month under review (Oct. 22-Nov. 20) registered an increase of 46.4% compared with the similar month of the previous Iranian year. The year-on-year inflation of the month ending Oct. 21 was 41.4%.

The overall CPI (using the Iranian year to March 2017 as the base year) stood at 275 last month, indicating a 5.2% rise compared with the month before. Month-on-month consumer inflation was 7% for the preceding month (Sept. 22-Oct. 21.)

SCI put average annual inflation for urban and rural areas at 29% and 28.8%, respectively.

CPI registered a year-on-year increase of 45.7% for urban areas and 50.3% for rural areas in the month ending Nov. 20.

The overall CPI reached 272.6 for urban households and 288.6 for rural households, indicating a month-on-month increase of 4.7% and 7.6% for urban and rural areas, respectively.

The highest monthly growth in the index among 12 groups of the basket of consumer goods and services purchased by households in the Iranian month ending Nov. 20 was recorded for “food and beverages” with 13.2% while a 1.1% monthly deflation was recorded for “transportation.”

The highest and lowest year-on-year inflation rates in the month under review were posted for transportation (96.5%) and education (20.9%) and the highest and lowest average annual inflation rates were registered for transportation (63.7%) and communications (10%).

Reasons Behind the Gap

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 the income deciles, according to Javad Hosseinzadeh, the head of the Statistical Center of Iran.

Noting that the gap between income deciles began to rise since the Iranian month ending Dec. 21, 2019, the official 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]. This is 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.

The SCI chief noted that the increase in foreign currency exchange rate also had a bigger impact on the prices of durable goods, which are mostly smuggled into the country.

“The year-on-year inflation rate for items such as refrigerators and other 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 for more 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 and that their purchasers’ price is substantially lower]. Year-on-year services inflation was 27.4% and the overall inflation of these goods was put at 39.5%,” he said.

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