SEPTEMBER INFLATION DATA

UNCLAS BAGHDAD 004211

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN IZ
SUBJECT: SEPTEMBER INFLATION DATA

REF: BAGHDAD 3460


1. (SBU) Iraq's consumer price index (CPI) decreased 12.8% in
September, and the year-on-year increase dropped to 51.6%.
The decrease is largely driven by price decreases in the
categories of Fuel/electricity (41.2%) and
Transport/communication (32.6%). GOI's Central Office of
Statistics and Information Technology (COSIT) lists
disaggregated percentage increases (month-on-month) as
follows:

Food 2.0%
Tobacco/liquor 2.3%
Clothing/shoes 6.3%
Furniture 3.0%
Fuel/electricity -41.2%
Transport/communications -32.6%
Medical services/medicine 0.2%
Misc. goods/services 2.6%
Rent 1.3%

Compared to the data from September 2005, prices grew at the
following rates:

Food 33.3%
Tobacco/liquor 19.4%
Clothing/shoes 29.1%
Furniture 18.2%
Fuel/electricity 165.3%
Transport/communications 152.2%
Medical services/medicine 21.6%
Misc. goods/services 36.4%
Rent 34.7%


2. (SBU) This data compares to the August month-on-month
increase in COSIT's weighted aggregate CPI of 15.1% and 76.6%
for the year-on-year. The month-on-month increases for the
previous six months are as follows:

July 8.3%
June 0.7%
May 1.2%
April -1.1%
March 1.7%
February 13.1%


3. (SBU) Despite the decrease in the CPI for the month, it
remains unclear that real inflation has entered a slowing
trend. The method by which COSIT measures inflation remains
inaccurate (see reftel) and the data may reflect seasonal
variation due to the Ramadan holiday, during which fuel
consumption (which factors more heavily in the weighting
system COSIT uses) typically decreases. Real inflation is
likely to be sigificantly higher than indicated in the COSIT
data. The apparent drop in prices also follows the
relatively high rate of inflation in August. Additional data
is needed before a clear trend toward deceleration emerges,
and engaging with the GOI on the importance of inflation
remains a high priority.
KHALILZAD