Iran: Services PPI Surges 5.9% QOQ, 32.6% YOY

EghtesadOnline: The overall Producer Price Index for the services sector (using 2011 as the base year) stood at 347.8 in the first quarter of the current Iranian year (March 21-June 21), indicating a 5.9% increase compared with the preceding quarter and a 32.6% rise compared with last year's same quarter.

News ID: ۷۸۴۷۹۸

04 August 2019

Services PPI is calculated based on the indexes of eight subsectors, namely “repairing motor vehicles, motorcycles and home devices”, “hotels and restaurants”, “transportation, warehouse services and communications”, “brokerage (insurance) services”, “real estate, renting and business”, “education”, “health services and social work”, and “other public, social and personal services”.

PPI for “repairing motor vehicles, motorcycles and home devices” stood at 431, indicating a 6.8% rise compared with the previous quarter and a 38.7% growth compared with the same quarter of last year, according to data reported by the Statistical Center of Iran.

The index for “hotels and restaurants” stood at 539.3, posting a 13.6% rise quarter-on-quarter and a 57.7% rise year-on-year, Financial Tribune reported.

For “transportation, warehousing services and communications”, PPI stood at 435.9, registering a 7.3% increase QOQ and 48.6% YOY.

For “financial brokerage (insurance)” it was at 366.9, indicating an 18.2% rise compared with the previous quarter and a 32% increase compared with the same quarter of last year.

“Real estate, renting and business” saw the PPI stand at 245.1, registering a 4.5% rise QOQ and 19.8% increase YOY.

For “education”, the index was at 310.1, posting a 0.3% rise compared with the previous quarter and 18.5% increase compared with the same quarter of last year.

“Health services and social work” had a PPI of 463.6, indicating a 2.8% rise over a quarter before and 20.7% increase over same quarter of the last year.

And, the PPI measured for the subsector of “other public, social and personal services” stood at 354.8, showing a 5.6% growth compared with previous quarter and 22.9% increase over same quarter of the last year.

PPI Versus 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 markets (as it was once called the Wholesale Price Index), production industries and 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 the future. Almost a perfect correlation exists between CPI and PPI.

According to the Statistical Center of Iran's latest report, consumer inflation registered a year-on-year increase of 48% in the Iranian month ending July 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 179.7 in the fourth month of the Iranian year, indicating a 2.8% rise compared with the previous month.

The goods and services Consumer Price Index in the 12-month period ending July 22 increased by 40.4% compared with last year’s corresponding period.

SCI had put the inflation rate for the preceding Iranian month, which ended on June 21, at 37.6%.