Wealthy Inflation Outpaces Inflation for Low-Income Households

Each Iranian household in October of this year spent, on average, 32.8% more for a "set of identical goods and services" compared to October of last year. The Statistical Center of Iran reported the point-to-point inflation rate for October at 32.8%, which is 7.1 percentage points higher than the inflation rate for September. The average inflation rate for October in this report was announced at 13.4%, which is 2.1 percentage points higher than the average inflation rate for September. The monthly inflation reported for October was 7.1%, which is 1.7 percentage points higher than the monthly inflation rate for September. According to the report from the Statistical Center of Iran, all inflation rates in the first month of autumn have shown an increasing trend. The 7.1% monthly inflation indicates a growing acceleration of price increases. In the Central Bank of Iran's report on the inflation rate for October, the point-to-point inflation, which compares the inflation rate for the reported month with the inflation rate for the same month last year, was reported at 36.9%, which is 5.5 percentage points higher than the point-to-point inflation rate announced for September. The average inflation rate for October in this report from the Central Bank was announced at 15.9%, revealing the continued growth of inflation in this month. However, the monthly inflation rate for October in the Central Bank's report was announced at 4.6%, indicating a 1.5 percentage point decrease compared to the previous month's monthly inflation rate. After a continuous increase over the past six months, the monthly inflation rate took a different trend in October. The Central Bank of Iran attributed this change in the slope of the monthly inflation rate to a "relative decrease in tensions in the currency market." Despite the decrease in the monthly inflation rate in October, the presence of this index within the 5% range could keep the average inflation rate at the end of this year within historical record channels. Among the main groups constituting the consumer price index in urban areas of Iran in October, the highest point-to-point inflation rate was attributed to the tobacco group, with an inflation rate exceeding 165%, which has maintained this first place in inflation among other main groups since the price surge in the currency market. The "Recreation and Cultural Affairs" group recorded an inflation rate of 80%, and the "Furniture, Household Items, and Services" group had an inflation rate of 71.8%, ranking next in the high inflation rates for October. In the Central Bank's report, the inflation rate for the "Food and Beverages" group in October was recorded at 55.9%, which is 9.9 percentage points higher than the inflation rate for this group in September. The point-to-point inflation rate for the "Food and Beverages" group in the Statistical Center of Iran's report for October was also announced at 45%. The report from the Statistical Center of Iran indicated that the importance coefficient of inflation for this group for the lowest income decile is 43%, while the importance coefficient of inflation for the "Food, Beverages, and Tobacco" group for the highest income decile drops to 17%. Therefore, changes in food and beverage prices have a greater impact on the expenditure basket of lower-income classes. A comparison of the inflation rates of the two specific groups of "goods" and "services" in the Central Bank's October report shows that the main burden of continuous inflation increase falls on the rising prices of goods, while the increase in service rates contributes less to the created inflation. Accordingly, the inflation rate for the specific "goods" group in October was 57.7%, while the inflation rate for "services" in October was reported at 17.5%, illustrating a significant difference. Changes in the price of the selected goods basket from Radio Farda in October compared to September show that the highest price increase among the 10 items in this basket was for potatoes, which experienced about a 50% price increase in one month. Among the 10 items listed in this selected goods basket, two items saw a slight price decrease, while the rest experienced price increases. Changing the base for comparing the prices of this basket from September this year to October last year shows a sharper inflation gap. In the second table, the price changes of the selected goods basket from Radio Farda in October this year compared to the same month last year are displayed. According to this comparison, the highest price changes were for eggs, which more than doubled during this one-year period. From October 2017 to October this year, none of the items listed in this goods basket saw a price decrease. According to the Statistical Center of Iran's announcement in October this year, the average inflation rate for the entire country, regardless of income decile, was reported at 13.4%, fluctuating between 12.7% for the first decile and 14.3% for the tenth decile. Thus, inflation for the wealthy has surpassed inflation for lower-income deciles, with price increases in various commodity groups, especially groups like recreation and cultural affairs and furniture, household items, which typically have a larger share in the expenditure basket of higher-income households, contributing to the inflation rate of the tenth decile surpassing that of the first decile. However, the tenth income decile typically has more maneuverability and flexibility to rebuild its income, which can practically compensate for this increase in costs, costs that are not recoverable for wage earners and those with lower salaries and incomes.