Overall Economy’s PMI Falls for Third Consecutive Month

The PMI, known by its Farsi acronym Shamekh, for Iran’s overall economy settled at 50.97 in the current Iranian year’s ninth month (Nov. 22-Dec. 21) from 51.07 registered in the previous month, indicating a 0.1-point or 0.19% decline.

According to the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture, the sponsor and coordinator of the report, the survey of businesses shows continuation of recession, fluctuation in foreign exchange rates and diminished purchasing power have negatively affected expectations in the business environment, such that companies witnessed a decline in working capital and purchase orders. 

Business owners say under the current conditions, they cannot plan for months in advance.

The headline PMI is a number from 0 to 100, such that over 50 indicates an economic expansion compared with the previous month. A PMI reading under 50 indicates contraction and a reading of 50 implies no change. 

PMI is an index of the prevailing direction of economic trends, aiming to provide information about business conditions to company directors, analysts and purchasing managers. 

According to the report, the “business output” sub-index decreased from 56.16 in the current fiscal year’s seventh month (Sept. 23-Oct. 22) to 53.86 in the eighth month (Oct. 23-Nov. 21) and declined to 53.13 in the ninth month (Nov. 22-Dec. 21).    

The “new orders” sub-index decreased from 55.16 in the seventh month to 47.38 in the eighth month but grew to 48 in the ninth month.    

The “supplier deliveries” sub-index, which measures how fast deliveries are made, decreased from 64.07 in the month ending Oct. 22 to 54.6 in the month ending Nov. 21, but grew to 59.23 in the month ending Dec. 21. 

The “raw materials inventory” sub-index decreased from 49.98 in the month ending Oct. 22 to 44.62 in the month ending Nov. 21, but grew to 46.49 in the month ending Dec. 21.    

The PMI reading of “employment” sub-index grew from 47.84 in the month ending Oct. 22 to 53.72 in the month ending Nov. 21, but declined to 48.74 in the month ending Dec. 21.   

To calculate PMI, seven secondary criteria are also surveyed by the center, namely “raw material purchase prices”, “warehouse inventory”, “exports”, “product price”, “fuel consumption”, “sales” and “production expectations.” 

The “raw material purchase prices” sub-index declined from 83.52 in the month ending Oct. 22 to 83.13 in the month ending Nov. 21 and declined to 82.01 in the month ending Dec. 21.  

The “warehouse inventory” sub-index decreased from 53.04 in the month ending Oct. 22 to 48.6 in the month ending Nov. 21, but grew to 49.72 in the month ending Dec. 21.    

The “exports” sub-index increased from 45.27 in the seventh month to 48.38 in the eighth month, but declined to 47.77 in the ninth month.        

The “prices of manufactured products or services” sub-index decreased from 63.55 in the month ending Oct. 22 to 63.14 in the month ending Nov. 21 and declined to 55.39 in the month ending Dec. 21.  

The “fuel consumption” sub-index increased from 57.66 in the month ending Oct. 22 to 64.26 in the month ending Nov. 21 and grew to 67.88 in the month ending Dec. 21. 

The “sales” sub-index increased from 54.53 in the month ending Oct. 22 to 54.74 in the month ending Nov. 21, but decreased to 54.03 in the month ending Dec. 21.     

The sub-index of “business output forecasts for the following month” decreased from 66.37 in the month ending Oct. 22 to 59.74 in the month ending Nov. 21 and declined to 56.03 in the month ending Dec. 21.       

The overall PMI decreased from 54.76 in the month ending Oct. 22 to 51.07 in the month ending Nov. 21 and declined to 50.97 in the month ending Dec. 21.   

PMI, among the most precise indicators showcasing a country’s economic condition, was first devised by the Institute for Supply Management in the United States in 1948. It is calculated as (P1 * 1) + (P2 * 0.5) + (P3 * 0) where P1 is the percentage of answers reporting an improvement, P2 is percentage of answers reporting no change and P3 is percentage of answers reporting a deterioration.