SCI Chief Explains Inflation Gap in Income Deciles

EghtesadOnline: 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, Javad Hosseinzadeh, the head of the Statistical Center of Iran, said.

News ID: ۷۸۵۶۴۹

06 October 2020

The average annual inflation gap among income deciles stood at 6.5% in the sixth Iranian month (Aug. 22-Sept. 21), indicating a 1.1 percentage point increase compared with the previous month.

The inflation gap in food, beverages and tobacco group among income deciles increased by 0.5 percentage points and that of non-food and services group widened by 1.8 percentage point compared with the month before, ILNA reported.

The average goods and services Consumer Price Index in the 12-month period ending Sept. 21 increased by 23.4% for the first decile (those with the lowest income) while it grew 29.9% for the 10th decile (those with the highest income).

Noting that the gap between income deciles began to rise since the Iranian month ending Dec. 21, 2019, Hosseinzadeh 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 official noted that the Consumer Price Index examines the weighted average of prices of a basket of consumer goods and services, which 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,” he said.

“The increase in foreign currency exchange rate also had a bigger impact on the prices of imported durable goods. 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. Year-on-year services inflation was 27.4% and the overall inflation of these goods was put at 39.5%.”

Semi-durable goods differ from non-durable goods in that they can be used repeatedly or continuously for more than a year and that they differ from a durable good in that their expected lifespan, though longer than a year, is often significantly shorter and their purchasers’ price is substantially smaller.

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

Average inflation rates grew by 24% for the second decile compared with last year’s corresponding period; 24.3% for the third decile; 24.6% for the fourth decile; 24.8% for the fifth decile; 25.1% for the sixth decile; 25.8% for the seventh decile; 26.3% for eighth decile and 27.6% for the ninth decile.

The highest overall CPI (using the Iranian year to March 2017 as the base year) stood at 267.3 for the 10th decile and the lowest calculated was 235.6 for the first decile. The first decile registered a 2.8% month-on-month inflation growth.

Monthly inflation growth was 2.9% for second, third, fourth and fifth deciles, 3% for sixth decile, 3.2% for seventh decile, 3.4% for eighth decile, 4.1% for the ninth decile and 5.3% for the tenth decile.

The year-on-year inflation rates increased by 31.1% for the first decile during the month under review, 31.7% for second, 31.9% for third, 32% for fourth, 32.2% for fifth, 32.7% for sixth, 34.2% for seventh, 35.4% for eighth, 38.5% for ninth and 44.6% 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.