Producer Inflation Rate in Iran Has Dropped to Single Digits

The average producer inflation rate in Iran reached 9.3 percent in September of this year, marking a single-digit figure. The Central Bank's report on changes in the producer price index for September 2015 indicates that this index reached 9.3 percent in the twelve months leading up to September this year compared to the same period last year, showing a decrease of 0.9 percentage points compared to the average producer price index in August of this year. In economic literature, the producer price index is referred to as a leading indicator of inflation, meaning that changes in the producer price index will manifest in changes in the prices of consumer goods and services with a few months' delay. Based on this, it can be predicted that changes in the inflation index in the coming months will continue to follow the downward trend observed in previous months. The producer price index has been declining since May 2013. According to the Central Bank's report, the point-to-point producer inflation rate, which reflects changes in the producer price index in September this year compared to the same month last year, reached 4.6 percent, which is one percentage point lower than the producer inflation rate in August. Additionally, the monthly producer inflation rate in September this year was recorded at 0.3 percent, down from 0.8 percent in August, indicating a decrease of 0.5 percentage points in the monthly producer inflation rate. Among the main groups comprising the producer price index, the highest growth was recorded in the health and social work group, which experienced a 27.2 percent increase in September compared to the same month last year, while the producer inflation in the construction (industry) group recorded a decrease of 1.9 percent in September 2015 compared to September 2014. The producer price index reflects changes in the prices of goods and services produced at the source and essentially mirrors the level of price changes at the wholesale and producer levels. In another report, the Central Bank published changes in the consumer goods and services price index for September 2015, announcing an average inflation rate of 15.1 percent for this month. The average inflation rate in August was reported at 15.6 percent, and comparing these two figures indicates that the trend of decreasing inflation rates continued in September. Previously, the Statistical Center of Iran, as the official body for announcing economic statistics and indices in Iran, reported the average inflation rate in urban areas of Iran for September this year at 13.6 percent. Analyzing the details of the consumer inflation price index for September also shows that the inflation rate in the main health and medical group, which recorded the highest increase in production, also led the growth of the price index for goods in the consumer market with a recorded growth of 23.3 percent. The largest decrease in the price index among the main commodity groups in September this year was recorded in the tobacco group, which saw a decrease of 4.2 percent compared to the same month last year. The continuous decrease in the inflation rate since the coming to power of Hassan Rouhani's government has led to various analyses; while supporters of the government's economic policies attribute this continuous and noticeable decrease to the government's financial and monetary discipline, control of monetary base growth and liquidity rates, and adjustment of expected inflation in society, some critics link this decrease in inflation rates to the prevailing recession in the Iranian economy, arguing that as the recession increases, people's purchasing power decreases, and this recession has had anti-inflationary effects. At the same time, currency price stability, recession, and declining demand in the market, along with the impact of falling global prices, can be considered among the most important factors influencing the reduction of producer inflation rates. The Higher Institute of Management and Planning Education and Research, affiliated with the Management and Planning Organization, in a report on the reduction of producer inflation rates, identified the 'rial price of imports' index as one of the reasons for the continuous decrease in the producer price index. Since imported intermediate goods play a significant role in Iran's industrial production, the decrease in the prices of imported goods and the rial price of imports has influenced the trend of reducing producer inflation rates and ultimately the average price index of consumer goods and services.