Monthly Inflation Rate Turns Negative After Six Years

The Central Bank and the Statistical Center of Iran have recently published reports on inflation changes for July 2015. The Central Bank's report indicates that the average inflation rate in the first month of summer 2015 reached 15.6%, unchanged from the year ending in June 2015. The point-to-point inflation rate, which compares July 2015's inflation with that of July 2014, shows a figure of 14.2%. The point-to-point inflation rate in June 2015 was at 16.2%, indicating a decrease in the point-to-point inflation rate in July compared to the previous month. Another noteworthy point in the Central Bank's report on changes in the consumer price index in urban areas of Iran for July 2015 is a 0.4% decrease in the monthly inflation rate, meaning that inflation did not increase from June to July this year, but rather took a reverse trend. The negative monthly inflation rate in July 2015 has occurred after more than six years (77 months). According to the time series report on monthly inflation rates from 1990 to July 2015 published by the Central Bank, the last time the monthly inflation rate was negative, and the general price level decreased from one month to the next, was in February 2009. During this 14-year and four-month period, a decrease in the monthly inflation rate has been experienced eight times, with 2005 being the record year for monthly inflation reduction, where from May to July of that year, inflation decreased each month compared to the previous month. These months were the last months of Mohammad Khatami's presidency, leading up to the June elections that resulted in Mahmoud Ahmadinejad succeeding him. However, in the Statistical Center of Iran's report on July inflation for urban households, the monthly inflation rate compared to the previous month is reported at 1.2%. The point-to-point inflation rate for July this year, according to this center, which is recognized as the official body for announcing and publishing economic statistics, has reached 12.8%. The point-to-point inflation rate for June reported by the Statistical Center was 14.2%. Comparing these two figures shows that the point-to-point inflation rate decreased by four-tenths of a percent from June to July 2015. Finally, according to this report from the Statistical Center of Iran, the average inflation rate for urban households in July 2015 reached 14.1%, which is one-tenth less than the average inflation rate for the twelve months ending in June this year. In the same report from the Statistical Center of Iran, the inflation rate for the main food and beverage group in July 2015 compared to July 2014 experienced a growth of 10.7%. The importance coefficient of this group in the Statistical Center's monthly inflation reports is evaluated at over 25%, significantly affecting changes in the overall index. The price index for the main food and beverage group in the Central Bank's report on inflation changes in July this year experienced a 2.6% decrease compared to the previous month, June 2015, although this price index shows a figure of 16% compared to the same month last year, July 2014, which can be termed as the point-to-point inflation rate for food and beverages. An examination of the price changes in the selected commodity basket by Radio Farda also provides a third narrative of price changes for ten essential food items. Based on the conducted studies, the average price change for this commodity basket in July 2015 compared to the previous month indicates a decrease of 1.22%. During this period, the largest price decrease was for eggs, with the price of a 30-egg carton decreasing by about 11%. The largest price increase in July this year compared to June 2015 was for domestic first-class rice, which experienced a price increase of about 5.5%. Details of price changes in the selected commodity basket by Radio Farda during this period can be tracked in Table 1. Changes in the prices of items in the selected commodity basket by Radio Farda in July compared to July last year also show that, on average, the prices of these goods decreased by 4.4%. The largest price decrease among these items during the July 2015 period compared to the same month last year was for onions, which experienced a decrease of over 13%. Among these ten items, the highest price increase was recorded for domestic first-class rice, which saw an increase of over 14% during this one-year period. More details regarding the price fluctuations of items listed in the selected commodity basket by Radio Farda during the two periods of July 2015 compared to July 2014 can be observed in Table 2. According to a report published by the newspaper Donya-e-Eqtesad, authored by Majid Heydari, the negative monthly inflation rate in July 2015 is attributed to price stability in the currency market, particularly the decrease in the dollar price, as well as the decline in the producer price index and the effects of seasonal fluctuations. The producer price index, according to the latest announcement from the Central Bank, which reported on producer price changes in February of last year, indicated that this index reached 11.4%. The monthly producer inflation rate in February of last year was negative 0.8%, with the most significant monthly decrease among specific groups related to the manufacturing or industrial group, which decreased by 2.7%. Producers' expectations regarding the resolution of nuclear agreement negotiations and the postponement of their economic decisions until after sanctions are lifted are among the factors influencing the decline in the producer price index. Therefore, it remains to be seen how the trend of inflation index changes will unfold in the months following the official announcement of the nuclear agreement between Iran and global powers and the extent to which this agreement will impact the currency market and other economic sectors in Iran.