Food Prices Surge in a Year Marked by War on Iran
Last week, the Statistical Center of Iran published its inflation report for Esfand (ending March 20), the final month of the Iranian year 1404. Despite the record-high inflation reported for the year, its most noteworthy fact is its release amid heavy bombing by the United States and Israel. It is a reminder of the resilience of the Iranian spirit—not only on the battlefield, but also in maintaining the state’s core functions on schedule. Perhaps more damaging than the destruction of the country’s physical capital is the erosion of its institutions, of which the production of accurate statistics—even when politically inconvenient—is essential and far harder to rebuild.
The report shows a sharp increase in the CPI—5.6% in Esfand alone (about a 92% annualized rate). This reflects the continued effects of exchange rate unification last November, compounded by wartime conditions that have prevailed since June. Inflation has accelerated over the past three months, reaching as high as a 193% annualized rate a month ago. As a result, point-to-point inflation for 1404 reached 90.2%, while average annual inflation—the more commonly cited measure—stood at 54.1%, the highest in recent memory.
Food prices led the increase, rising roughly sevenfold over the year, compared to a 90% increase in the overall price level. This divergence is largely explained by the elimination of foreign exchange subsidies for food and medicine, as well as increased public expenditures associated with the war. When food prices rise faster than overall prices, the result is typically higher poverty rates and worsening income distribution. The unyielding and fast rising food prices during the year likely forced most households to increasingly cut back on non-food expenditures, mounting the pressure of inflation.
Food prices led the increase, rising roughly sevenfold over the year, compared to a 90% increase in the overall price level. This divergence is largely explained by the elimination of foreign exchange subsidies for food and medicine, as well as increased public expenditures associated with the war. When food prices outpace general inflation, poverty rises and income distribution deteriorates. The persistent surge in food prices likely compelled households to reallocate spending away from non-food items, adding to the pressure of inflation.
Looking back at inflation over the year, the draft budget for 1405—unveiled last fall and proposing an average wage and salary increase of just 20%—now appears highly unrealistic. Although it was later adjusted upwards, the initial disconnect between nominal wage adjustments and actual inflation is one of the factors that others and I have noted behind the protests that fueled the December 28 protests.
Iran’s currency crisis: what the rial does (and does not) tell us
The recent nationwide protests in Iran are the result of an accumulation of grievances, increasingly focused on what is commonly described as the “loss of value of the national currency.” This phrase is a familiar everyday lament among Iranians, who often equate the value of the rial—measured in U.S. dollars—with living standards. In doing so, they typically focus on the free-market exchange rate. Although this is a narrow market, it produces the most dramatic signal. The bulk of foreign exchange transactions take place at lower rates, but access to them is limited. The free-market rate, now around 1.3 million rials per dollar and averaging just under one million in the past month (see the blue line in Figure 1, left axis), is roughly 100 times its level when Obama-era sanctions took effect in late 2011.
(more…)Rethinking CPI, Food Prices, and Living Standards in Iran
A comment from an informed reader prompted me to re-examine my earlier post on living standards in 2024/25. The issue raised was whether it is adequate—or even accurate—to deflate household expenditures with the overall CPI, as reported by the Statistical Center of Iran (SCI), while ignoring the fact that food prices have risen faster than average prices.
(more…)Household Survey Data Reveal Modest Gains in Iran’s Living Standards for 2024/2025
The recently released microdata from Iran’s Household Expenditures and Income Survey (HEIS) offers valuable insights into household economic conditions across the country during the Iranian year ending on 20 March 2025 (Iranian year 1403 or 2024 for short). This post updates my earlier post on Iranian living standards in 2023.
(more…)The US-Israel war on Iran revives inflation fears
Kudos to the Statistical Center of Iran for not missing last month’s inflation report (Khordad = 21 May-20 June), despite the destruction caused by the Israeli bombing of Tehran. The attack struck at the heart of Tehran, a few blocks from SCI’s main building. Significantly, for those who habitually question Iran’s official statistics, the report is not flattering.
(more…)Iran’s GDP on the eve of the Israeli attack
I was planning to write an update on the state of Iran’s economy when Israel attacked Iran on June 13. For several days, it felt pointless to continue analyzing economic data — not because the data had become irrelevant, but because war had pushed the economy off center stage. Monitoring economic trends had mattered when Iran’s economic condition shaped its geopolitical posture. At that time, I saw value in challenging distorted narratives, those claiming that the economy was teetering on the brink of collapse — perhaps to justify preemptive military action — as well as those claiming Iran was thriving under sanctions, a blessing as some hardliners in Tehran liked to describe them.
(more…)Iran’s Investment Puzzle: Diverging Data, Converging Concerns
In a recent post, I discussed the rising standard of living in recent years and questioned how that could persist while the share of investment in GDP has been falling. Not only has it been falling, but to levels that seem inadequate for maintaining the capital stock—and with it, the quality of essential services like electricity. This is clearly unsustainable. If investment drops below 10 to 15 percent of GDP, the country would essentially be consuming by running down its capital—much like a household that sustains itself by selling off its furniture.
(more…)Sanctions and unequal regional growth in Iran
Regional equity is crucial in a centralized yet multi-ethnic country like Iran. In the language of empirical growth literature, convergence allows poorer regions to catch up, moving the country toward a more balanced standard of living. This process strengthens national unity by ensuring that no region is left behind. In contrast, divergent growth, where disparities widen over time, risks pulling regions apart and undermining national cohesion.
(more…)Trump’s return shocks Iran’s currency and prices
With Trump’s return to power, Iran is bracing for another round of maximum pressure. The rial has already fallen by one-third in the unofficial free market since last November, when his victory was announced. As before, the sharp devaluation has quickly translated into higher prices and rising social tensions.
(more…)New data reveal rising living standards in Iran
The latest data files for the 2023/2024 (1402) Household Expenditure and Income Survey (HEIS) just became available on the website of the Statistical Center of Iran (SCI). SCI had already published its summery results (in Persian) a couple weeks ago, showing considerable increase in nominal incomes (53.9 and 51.4 percent for urban and rural households, respectively) and expenditures (55.9 and 45.4 percent). Given the year’s inflation of about 40%, these numbers indicate considerable increases in real incomes and expenditures.
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Tyranny of numbers 
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