Rising Food Prices; The Driving Force Behind Inflation Rate in Farvardin

The Statistical Center of Iran announced that the average inflation rate in Farvardin this year was 8.1 percent, while the Central Bank calculated the average inflation rate for Farvardin at 9.2 percent. According to the Statistical Center of Iran, the average inflation rate in Farvardin decreased by 0.1 percentage points compared to Esfand's inflation, whereas the Central Bank reported an increasing trend in the average inflation rate compared to last year, with an increase of 0.8 percentage points. Overall, the decrease of 0.1 percentage points in the inflation rate compared to the increase of 0.8 percentage points in the Central Bank's report occurred during a month that experienced severe currency fluctuations in the foreign exchange market, and it is likely that this instability in the currency market and the surge in the dollar price to over 6,000 tomans in the coming months will have significant inflationary effects. According to the Statistical Center of Iran, the point-to-point inflation rate for Farvardin, which compares the inflation rate in this Farvardin with the same month last year, was 7 percent. The point-to-point inflation rate for the first month of this year in the Central Bank's report was recorded at 7.9 percent. Additionally, the monthly inflation rate, which compares inflation rates in two consecutive months, was reported at 1.3 percent by the Statistical Center of Iran, while the Central Bank recorded it at less than 1 percent (-0.8 percent). If the monthly inflation rate remains close to or above 1 percent in the coming months, it is not far-fetched to expect that the achievement of a single-digit inflation rate may be lost. In the Statistical Center of Iran's statistical narratives regarding the consumer inflation rate, the monthly inflation rate has fluctuated below 1 percent since Aban last year, which ultimately led to the conclusion that last year, according to the Statistical Center and the Central Bank of Iran, the inflation rate was controlled in a single-digit range below 10 percent. A noteworthy point in the Statistical Center of Iran's report on the consumer price index for Farvardin this year is the average inflation rate for the major group of 'food, beverages, and tobacco,' which was reported at 11.2 percent this month. This index is significant because the price changes in this group, which are related to basic human needs, have a greater impact on the lower income deciles of society and affect the cost basket of these households. For several months, the inflation rate for this group has surpassed that of the major group of 'non-food goods and services.' According to the Statistical Center of Iran, the inflation rate for the major group of 'non-food goods and services' in Farvardin was reported at 6.9 percent. The leading inflation in Farvardin this year among the main groups and sectors was attributed to the 'education' group, which recorded an increase of 11.4 percent, followed closely by the 'food and beverage' group with an inflation rate of 11.3 percent. Previously, the 'health and medical' group had been the leader in inflation among the main groups under review for several months, but it appears that inflation in this group has slightly adjusted. The price index for the 'health and medical' group in the first month of this year grew by an average of 7.1 percent. However, according to the Central Bank of Iran's narrative, among the specialized groups, the price index for the specialized 'service' group remained the leader in inflation, reaching 9.8 percent in Farvardin, while the commodity inflation for this month was reported at 6.1 percent. According to the Central Bank's report, the highest average inflation rate among the main groups was recorded for the 'food and beverages' group, which registered a growth of 12.3 percent. The high food inflation rate in the reports from both the Central Bank and the Statistical Center of Iran was one of the common focal points of the two reports, which underscores the importance and attention to price changes in this group in the coming months. One might attribute the rise in the price index for this group to the shortage of fruit and vegetables in the spring season or the high prices of some food items due to instability in the currency market and concerns about the future financing of imports for red meat production. However, at the same time, monitoring the price changes of 10 items in the 'Radio Farda Selected Basket,' which includes commonly consumed items in Iranian households' food baskets, shows that in Farvardin, the simple average price of this basket decreased by 1.4 percent compared to Esfand last year. The most significant price drop among these food items was for tomatoes and eggs, while the highest price increase during these two time periods was attributed to onions. In Table 1, the details of the price changes for these ten items can be seen. The comparison of price changes for the items in the Radio Farda Selected Basket from Esfand last year to Farvardin this year shows that the average price of this basket increased by 4.2 percent compared to the same month last year. The highest price increase during these two time periods was for onions, which rose by 29 percent, while the most significant price drop was for tomatoes, which became 29.5 percent cheaper for customers. Details regarding the price changes of items in the Radio Farda Selected Basket in Farvardin this year compared to the same month last year can be seen in Table 2. Earlier, the Central Bank published a report announcing the changes in the producer price index for Esfand 1396. According to that report, the average producer inflation at the end of last year reached 10.5 percent. It can be predicted that the producer inflation rate will eventually affect the consumer sector in the coming months. Among the main groups examined in the producer price index report, the price index for the main construction (industry) group led producer inflation with a growth of 15.1 percent, while the education group ranked second. The Statistical Center of Iran, in its studies, identified the increase in the price of 18-carat gold and computer equipment as some of the most effective factors on the growth of the inflation rate, but in this report, it remained silent about the impact of the increase in the price of currency, especially the US dollar, on the prices of other goods and services in Farvardin.