Iran's PMI Growth Remarkable

EghtesadOnline: The Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture has measured Iran's Purchasing Managers’ Index, under the Farsi acronym “Shamekh”, for the Iranian month of Bahman (Jan. 21-Feb. 19).

News ID: ۷۴۶۸۵۴

06 March 2019

The new report indicates that despite a significant improvement in the index during the month, Iran’s economy is still in recession.

Results published on ICCIMA's website show that PMI stood at 47.63 in Bahman from 39.35 in the preceding month of Dey (Dec. 22, 2018-Jan. 20), indicating an 8.28-point or 21.04% growth month-on-month.

PMI is an indicator of economic health for manufacturing and services sectors. The purpose of PMI is to provide information about current business conditions to company decision-makers, analysts and purchasing managers, according to Financial Tribune.

The headline PMI is a number from 0 to 100. A PMI above 50 represents an expansion when compared with the previous month. A PMI reading under 50 represents a contraction and a reading at 50 indicates no change.

PMI is based on a monthly survey sent to senior executives of more than 400 companies. It is based on five major survey areas: new orders with the importance weight of 30%, raw material inventory levels (10%), production (25%), supplier deliveries (15%) and employment (20%).

The surveys include 12 questions about business conditions and changes, whether it is improving, deteriorating or showing no change.

Industrial Sector, Subset Fields

At present, ICCIMA publishes reports only for Iran’s industrial sector and its 12 subset fields. It also plans to survey the services and agricultural sectors in the near future. The report, which is published on a monthly basis, is a first of its kind in the country.

The production sub index for Iran’s industrial sector increased from 37.01 in Azar (Nov. 22-Dec. 21, 2018) to 39.66 in Dey to 47.42 in Bahman.

For the first time since the index was launched, the production sub index shows numbers higher than 50 for several industries.

“Clothing and Leather Industries”, “Wood Industries, Paper and Furniture”, “Chemical Industries” and “Metal Industries” register the highest month-on-month increase whereas “Non-Metallic Mineral Industries” registered the lowest output compared with the preceding month.

The "New Orders" sub index increased from 32.15 in Azar to 33.82 in Dey to 54.3 in Bahman. The improvement of this sub index is attributable to strong demand in the final months of the year.

The "Supplier Deliveries" sub index, which measures how fast deliveries are made, increased from 49.98 in Azar to 52.46 in Dey but slid to 45.93 in Bahman.

The "Raw Materials Inventory Levels" sub index increased from 35.46 in Azar to 38.8 in Dey, but dropped to 31.77 in Bahman. “Non-Metallic Mineral Industries”, “Rubber and Plastic Industries”, “Wood Industries, Paper and Furniture” and “Refineries Products” posted the highest raw materials inventory levels whereas “Textiles” and “Clothing and Leather Industries” posted the lowest raw materials inventory levels in Bahman.

"Employment" decreased from 46.34 in Azar to 39.18 in Dey, but climbed to 47.07 in Bahman.

Seven Secondary Criteria

To calculate PMI, seven secondary criteria were also surveyed by the center, namely "Raw Materials Purchase Prices", "Warehouse Inventory Level", "Exports", "Prices of Products", "Fuel Consumption", "Sales Level" and "Production Expectations".

The "Raw Materials Purchase Prices" sub index improved from 61.83 in Azar to 66.92 in Dey to 76.79 in Bahman.

The "Warehouse Inventory Level" sub index improved from 55.75 in Azar to 56.48 in Dey, but dropped to 45.86 in Bahman.

The "Exports" sub index decreased from 39.35 in Azar to 38.09 in Dey, but increased to 45.17 in Bahman.

The "Prices of Products" sub index decreased from 48.33 in Azar to 47.47 in Dey, but improved to 58.13 in Bahman.

The "Fuel Consumption" sub index rose from 47.51 in Azar to 47.83 in Dey to 51.86 in Bahman.

The "Sales Level" sub index improved from 30.33 in Azar to 32.21 in Dey to 49.53 in Behman.

The "Production Expectations" sub index improved from 48.7 in Azar to 55.24 in Dey to 53.81 in Bahman.

The overall PMI index for industries improved from 39.21 in Azar to 39.35 in Dey to 47.63 in Bahman.

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