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…)The real depreciation of the rial under sanctions
In my previous post I argued that sanctions and the multiple devaluations they have caused have increased the competitiveness of the Iranian economy. This means that inflation did not increase enough to undo a series of devaluations since 2011, so that the rial is cheaper in real terms, not just nominal terms. If this is the case, removal of financial sanctions confer important benefits on Iran, perhaps exceeding that of the release of frozen funds or more oil sales to China. Below I present the evidence of rial’s devaluation in real terms and leave the question of its potential for growth of non-oil exports to another time.
(more…)Is Iran’s inflation moderating?
Note: A hiccup on the WordPress.com site caused this post to be removed after it was published on August 29. I am reposting it here with minor edits.
After some delay, the Statistical Center of Iran (SCI) has published its inflation report for the Iranian month of Mordad that ended on August 20. The report shows that prices were rising faster than in recent months, at 45.3% annual rate compared to an average of 27% for the preceding two months. The report undermines government hopes that inflation might come down to “around 30%” by the year’s end, a goal that the new Central Bank governor, Mohammad Reza Farzin, has been communicating to reporters. He has put inflation control as his main focus.
(more…)Delay and discrepancy in Iran’s inflation data
For the past several years, on the first day of each month the Statistical Center of Iran (SCI) has published the inflation report for the previous month. But, this month, the report for the first Iranian month of the new Iranian year 1402 (Esfand, which ended on 20 March 2023) is yet to be posted. The official explanation is that SCI is in the process of changing the base year for the CPI from 1395 (2016) to 1400 (2021). Five-year updates are normal and necessary because the expenditure weights used to calculate the CPI change over time. Presumably they are being recalculated using the household budget survey for 1400, which was concluded a year ago. Has there not been enough time to estimate the new weights?
(more…)Good news for Iran from the inflation front
Good economic news greets President Rouhani as he arrives in New York for the UN General Assembly this week: a declining trend of inflation. According to the latest consumer price index data published by the Statistical Center of Iran, during the Iranian month of Shahrivar (August 21-September20, 2019) inflation reached its lowest level since Trump’s assault on Iran’s economy began 18 months ago: the CPI increased at an annual rate of just 6.1 percent. When Trump reimposed sanctions in May 2018, inflation was quite low: 2.7 percent annually in March 2018 and rose to 126.7 percent in October. It has declined more or less continuously from that peak since (see graph of the 3-month moving average below). (more…)
Is Iran’s inflation rising?
The most recent report on consumer prices (link in Persian) published by the Statistical Center of Iran (SCI) last week shows that prices rose faster in Tir 1398 (June 21 to July 20, 2019) than they did in the preceding two months. Low inflation rates during Ordibehesht (roughly, May) and Khordad (June), 19 percent and 10 percent (measured annually), seemed to signal that the cost push inflation of 2018 may be working its way out of the system. But, the sharp increase in Tir prices, 38 percent annually, three times as fast as the previous month, may suggest otherwise. The dollar in the free market responded quickly, jumping above 120,000 rials per dollar. (more…)
Fact checking the meat consumption of Iranians
The rapid increase in the price of meat in the last few months has turned this food item of dubious health value into the lightning rod for the suffering of Iranian consumers. Viewers of the BBC Persian program may recall a stark graphic that purported to show that the amount of red meat that a minimum wage worker could buy has declined from 74 kg per month in 1357 (1978) to 10 kg in 1397 (2018). (more…)
A note on measuring living standards
A few weeks ago, in this blog and in opinion pieces (here, here and here), I argued that during the three decades since the end of the war with Iraq (1988), Iran’s economic growth exceeded that of Turkey, such that by 2012, when US sanctions intensified, living standards in the two countries were very similar. My analysis, which surprised some and angered others, is because of the particular data I used to measure GDP per capita (which I also refer to as the living standard). GDP comparison is not rocket science but most journalists (and even many economists) often get it wrong. So, in this post I try to explain why it is important that we use data specifically intended for such comparisons.
Rouhani’s new budget cuts back on expenditures, big time
If the government of Hassan Rouhani has a plan for fighting the downward trend in Iran’s economy, the one started with the US withdrawal from the nuclear deal, it is not to be found in its proposed budget for the Iranian year 1398 (March 21, 2019 to March 20, 2020). The budget, which may be modified by Iran’s parliament in the next few weeks, is proposing serious cuts to expenditures. Blaming shrinking revenues from oil, the government has decided to deal with the shock of the Trump sanctions and fleeing private investment by reducing its own expenditures. Not a surprise from a government that has made fighting inflation its top priority and jobs creation the purview of the private sector. This is reasonable logic in normal time, but not when factories are cutting back on production and employment or shutting down altogether. (more…)
Is Iran’s inflation really slowing?
In my last blog post I suggested that Iran’s inflation may be slowing down, and the latest consumer price data from the Statistical Center of Iran (SCI) suggest that this may indeed be the case. The Consumer Price Index (CPI) published by SCI rose by 2.6 percent for the month of Azar (November 21 to December 20), an annual rate of increase of 26 percent. This is high by world standards but low by the standards of this summer, when in August the rate shot up to 127 percent (see Figure 1). More importantly, it is about the same as the month before, which is why it is safe to say that calmer — not better — times are ahead. Unfortunately, the reporting of prices has created confusion, some numbers showing inflation slowing while headlines say the opposite. (more…)
Tyranny of numbers 
1 comment