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 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…)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…)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…)Good economic news fails to impress Iranians as they go to the polls
Two pieces of positive economic news were published last week, continued economic growth last fall and lower inflation for the Iranian month of Bahman that ended on February 20. You would think that days before the elections for the parliament and the Assembly of Experts on March 1, they would attract attention and scrutiny. But in Iran public opinion about the economy and elections have moved beyond facts and data. Public opinion because people dismiss official news about the economy as propaganda, and elections because, thanks to heavy vetting, only one side appears to have a chance of occupying the most seats in the two assemblies.
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Tyranny of numbers 
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