Recently an article posted on the government’s website claimed that household resources have doubled under the Ahmadinejad administration. Quoting from the Central Bank’s urban expenditure survey, it said that household expenditures rose from 56.6 million rials per year in 1383 (2004, the last year of Khatami’s presidency) to 113. 2 million in 1387 (2008). The numbers are accurately reported, but I can’t imagine that anyone in Iran would take the claim of doubling of family incomes seriously. One thing you cannot accuse Iranians of is money illusion. If there is any illusion it is in the opposite direction–that inflation reduces real incomes no matter how fast incomes increase in nominal terms.
As the article acknowledges, prices have increased during the same period, but not by enough to wipe out the nominal increase. True, but barely so. During 1383-1387 (2004-2008) the Consumer Price Index (CPI) increased by 83.3 percent, which means there wat a 16.7 percent real increase in expenditure, but food, which can cost as much as half a poor family’s budget, nearly doubled in price (all Central Bank numbers), as did housing, which can take another 30 percent. Why boast about an average 4 percent increase in real urban household expenditures (16.7 percent in four years) during a period when oil prices reached above $140 per barrel?
The picture for household resources appears even less flattering according to the data published by Iran’s Statistical Center (SCI). The figure to the left shows how nominal expenditures have changed according to the two series. The CBI series shows a faster increase in expenditures. And the one to the right shows what happens when you deflate expenditures by the CPI (1383=100):
All series show a decline in expenditures in 1387 (2008), which is not surprising given the poor state of the economy in that year (and still), but the SCI series shows a much deeper decline.
Quite apart from the issue of accurate reporting of real and nominal figures, the data on urban expenditures, which both CBI and SCI produce, raise a more important question for those of us who work with Iran’s expenditure data: What explains the divergence between the two urban expenditure series after 1385? They seem to have tracked each other rather well until then. Any ideas? (see the postscrip below)
Here is the table that I used to generate the graphs. The numbers are current rials per year and taken from the household budget survey reports of CBI and SCI for various years.
Postscript: I think I found the reason why the Central Bank and SCI data differ. The CBI expenditures data are collected from 72 largest cities, whereas SCI data is from all urban areas, which include small towns of about 5000 people. We now learn something new from the graphs above: the impact of the economic contraction has been harder on smaller cities and rural areas. The CBI data shows that the largest cities were not hit until 1388, whereas all urban areas were hit slightly in 1387, and rural areas significantly in that year.