Everything About Inflation in 2015

Although there was hope in the middle of last year that by the end of the year, Iran's economy would witness a single-digit average inflation rate, ultimately, the average inflation rate did not achieve the single-digit mark, and single-digit inflation was only a feature of point-to-point inflation rates. The average inflation rate for 2015, according to the Central Bank's final report on the consumer price index in urban areas of Iran, remained at 11.9 percent, although the point-to-point inflation rate for the last month of last year in this report stood at 8.3 percent. However, the average inflation rate in the reports from the Statistical Center of Iran at the end of 2015 showed slight differences from the Central Bank's narrative. According to the calculations of the Statistical Center of Iran, the average inflation rate in urban areas of Iran at the end of 2015 reached 11.3 percent, and the declining trend of inflation ultimately did not lead to a single-digit figure. The Statistical Center of Iran announced the consumer price index for rural households in 2015 as 10.6 percent. The point-to-point inflation rates for the last month of last year in the Statistical Center's reports for urban and rural inflation were 9.7 and 9.8 percent, respectively. However, aside from the macroeconomic figures of the inflation index in the reports from the Statistical Center of Iran and the Central Bank, examining the details and components of these indices is also noteworthy. In the Central Bank's latest report on the price index of goods and services in 2015, it was emphasized that the 11.9 percent inflation was driven by inflation in the services sector, with the point-to-point inflation rate for the 'service group' in the last month of last year being 13.6 percent, while the inflation rate for the 'goods group' at the end of last year was only 4.6 percent. According to the Central Bank, the highest figures in the point-to-point inflation index for goods and services groups belonged to the education group, which recorded a point-to-point inflation of 21.7 percent at the end of 2015, which is approximately double the average inflation. Following the education group, the price index for the 'health and medical' group recorded a 17.4 percent increase, securing the next highest inflation position among the main groups of 2015. Among these groups, the 'tobacco' group was the only one that experienced a decrease, with a negative inflation rate of 0.9 percent in 2015. After this group, the lowest price index growth among the main 12 groups of the Central Bank was related to the price index of the 'food and beverages' group, which recorded a growth of 3.5 percent at the end of 2015. The reports from the Statistical Center of Iran on inflation in 2015 also stated that the price index for the major group of 'non-food goods and services' grew at a faster pace than the price index for the major group of 'food, beverages, and tobacco' in both rural and urban areas. The inflation rate for the non-food goods and services index during 2015 was 12 percent in urban areas and 11.2 percent in rural areas. The gap in the inflation rate for the 'food, beverages, and tobacco' group, broken down by geographical area, was close, with the rate recorded at 9.7 percent in urban areas and 9.8 percent in rural areas last year. Based on reports from the Statistical Center of Iran on inflation rates from 2012 to 2015, it indicates that the inflation rate for the 'food and beverages' group during this period for urban households decreased from 45.1 percent to 9.8 percent. This trend for the non-food goods and services group decreased from 22.6 percent to 12 percent. Examining the changes in the inflation rate of these two groups in rural areas also shows similar changes, as the inflation rate for the 'food and beverages' group in rural areas decreased from 43.9 percent in 2012 to 10 percent in 2015. The inflation rate for the non-food goods and services group for rural households in Iran in 2012 was 24.6 percent, which decreased to 11.2 percent in 2015. In this context, examining the price changes of the selected goods by Radio Farda is also noteworthy. The average price changes of these 10 items in the last month of 2015 compared to the last month of 2014 indicate that the average price of this basket increased by less than 8 percent (7.8 percent) during this period. The highest price increase was related to autumn with an 80 percent growth, and the most significant price decrease was for tomatoes, which saw a 40.7 percent reduction. When the reference point for comparing the prices of items in this basket is changed from the last month of 2014 to the last month of 2015, the average price changes of the selected goods basket face a 2.5 percent decrease, indicating price adjustments from February to March of last year. The most significant price decrease in this period was for a tray of 30 eggs, which recorded about a 15 percent (14.6 percent) reduction. The highest price growth among these 10 items was for chicken meat, which increased by 5.5 percent during this period. However, comparing the price changes of this basket in the two periods of last winter and the winter of 2014 also shows that the average price of these items increased by more than 12 percent (12.14 percent) overall. The highest price growth in the same season over two consecutive years was recorded for onions, which saw a price increase of more than 60 percent (63.5 percent) during this period, while the most significant price decrease among the items listed in this selected goods basket belonged to potatoes, which were 14.5 percent cheaper from winter 2014 to winter 2015. Although predicting the inflation rate in 2016 is not possible without knowing the government's approach in various economic areas, including the trend of government debt repayment to banks and contractors, the rate of money supply growth, banking and monetary policies in providing loans to different economic sectors, allocation of development budgets, etc., economic officials have assured that the government will not sacrifice its inflation achievements for the sake of restoring growth and achieving development. However, there are many uncertainties in realizing this proposition. Beyond speculating about government economic policies and their impact on inflation rate changes, based on the assessment of the producer price index as a leading indicator for the consumer inflation index, it can be hoped that the declining trend of inflation in the coming year will continue. The average producer inflation rate at the end of 2015 reached 4.9 percent, and the point-to-point inflation rate for production in the last month of last year was not higher than 3.5 percent, which are hopeful signs for maintaining the trend of decreasing inflation in the coming months at the consumer level. However, an interesting point in the Central Bank's report on the producer price index at the end of 2015 is the high inflation rate of the main groups related to services. In this report, groups with high producer inflation rates are the same groups that also recorded the highest inflation rates in the consumer inflation index. For example, the inflation rate for the main group 'education' in the producer price index was recorded at 21.7 percent, while the consumer price index for the education group also had the highest inflation rate among other groups. Additionally, in the Central Bank's report on production inflation, the price index for the main group 'health and social work' also faced a growth of 19.5 percent, while the price index for the 'health and medical' group in the consumer inflation report was among the highest recorded figures for inflation among various goods and services groups. Given this, a decrease in the inflation rate of these groups at the consumer level in the coming months will not be very likely. In this context, the declining trend of inflation in February was maintained.