The report shows the overall Producer Price Index for the services sector (using 2011 as the base year) stood at 396.4 in the third quarter of the current Iranian year (Sept. 23-Dec. 21, 2019), indicating a 6.2% increase compared with the preceding quarter and a 27.8% rise compared with the same quarter of last year, according to Financial Tribune.
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 the subsector “repairing motor vehicles, motorcycles and home devices” stood at 508.2, indicating an 8.9% rise compared with the previous quarter and a 34% growth compared with the same quarter of last year, according to latest data presented by SCI.
The index for “hotels and restaurants” was at 628.5, posting a 7.2% rise quarter-on-quarter and a 46.3% rise year-on-year.
“Transportation, warehousing services and communications” PPI stood at 510.1, registering a 6.5% increase QOQ and 38.5% YOY.
“Financial brokerage (insurance)” PPI was 375.2, indicating a 1.4% rise compared with the previous quarter and a 25.7% increase compared with the same quarter of last year.
“Real estate, renting and business”’ PPI stood at 261.6, registering a 1.4% rise QOQ and a 14.7% increase YOY.
“Education” PPI stood at 368.4, posting a 17.1% rise compared with the previous quarter and a 20.6% increase compared with the same quarter of last year.
The PPI index for “health services and social work” stood at 544.2, indicating a 6.2% rise over the previous quarter and a 23.5% increase over the same quarter of last year.
And, PPI measured for the subsector of “Other public, social and personal services” stood at 404.6, showing a 6.7% growth compared with the previous quarter and a 24.2% increase over the same quarter of last year.
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 perspective different from 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 future months. Almost a perfect correlation exists between CPI and PPI.