Iran's PPI-CPI Inflation Gap Widening

EghtesadOnline: Inflation data provided by the Central Bank of Iran indicate a marked gap between Consumer Price Index and Producer Price Index trends.

News ID: ۷۸۴۳۸۷

10 December 2018

Analysts at Tehran Chamber of Commerce, Industries, Mines and Agriculture note that the gap between PPI and CPI inflation continued to widen in the Iranian month of Aban (Oct. 23-Nov. 21) as the former rose to 63.3% year-on-year from 59% in the preceding month, while CPI inflation ticked up to 39.9% from 36.9%.

Depreciation of the Iranian rial against the US dollar has been one of the main drivers of the increase in PPI over the past months, but it seems that the impact of the rise in PPI on CPI has been controlled by other factors, including the government’s price control, TCCIM reported.

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, Financial Tribune reported.

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 sector, manufacturing industries and commodities markets from the perspective of the seller.

The PPI (using Iranian year to March 2017 as the base year) stood at 182.1 in Aban, indicating a 3.5% rise compared with the previous month.

The average PPI in the 12 months ending Nov. 21 grew by 26.9% compared with last year’s corresponding period.

CBI put the preceding month’s annual PPI inflation at 22.4%.

The overall CPI stood at 153.6 in Aban, indicating a 3.5% increase compared with the previous month. The average CPI in the 12 months ending Nov. 21 increased by 18.4% compared with last year’s corresponding period.