Iranian Industrial Performance Showing Steady Improvement

EghtesadOnline: Latest economic indicators for manufacturing sectors provided by the Statistics and Economic Analysis Center of the Iran Chamber of Commerce, Industries, Mines and Agriculture suggest Iranian industries have improved their performance.

News ID: ۷۴۷۰۸۶

17 April 2019

It is five months now that the ICCIMA Statistical Center measures the purchasing managers’ index (PMI) in Iran, under the Farsi acronym “Shamekh”.

According to its latest report, PMI for the final month of last Iranian year, Esfand, (Feb. 20-March 20) stood at 55.36 from 47.63 in the preceding month, Bahman (Jan. 21-Feb. 19), indicating a 7.73-point or 16.23% 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, Financial Tribune reported.

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 at 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 any changes, whether it is improving, no changes or deteriorating.

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.

Five Main Indices

The "production" sub-index for Iran’s industrial sector increased from 39.66 in Dey (Dec. 22, 2018-Jan. 20) to 47.42 in Bahman and 57.23 in Esfand.

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

“Wood, paper and furniture”, “vehicle and auto parts manufacturing”, “machinery manufacturing”, “tire and rubber production”, “chemicals”, “food production”, “metal” and “textiles” registered the highest month-on-month increase of above 50, whereas “non-metallic minerals” registered the lowest output compared with the preceding month.

The "new orders" sub-index increased from 33.82 in Dey to 54.30 in Bahman and 66.81 in Esfand.

The index stood above 50 for the second consecutive month.

All the above industries posted PMIs higher than 50 in Esfand. “Vehicle and auto parts manufacturing” registered the highest PMI (79.17) while “clothing and leather production” posted the lowest PMI (50).

The "supplier deliveries" sub-index, which measures how fast deliveries are made decreased from 52.46 in Dey to 45.93 in Bahman but rose to 50.50 in Esfand.

The “vehicle and auto parts manufacturing” registered the highest PMI reading of 86.3 among all industries, suggesting that their products were delivered to customers later than other industries.

The "raw materials inventory levels" sub-index decreased from 38.80 in Dey to 31.77 in Bahman but recovered to 39.96 in Esfand.

“Vehicle and auto parts manufacturing”, “wood, paper and furniture” and “non-metallic minerals” indicated the highest PMI while “food” posted the lowest raw materials inventory levels in Esfand.

The PMI reading of “employment” sub-index remained below 50: It increased from 39.18 in Dey to 47.07 in Bahman and 47.17 in Esfand.

The textile industry registered the highest PMI (54.55) whereas “vehicle and auto parts manufacturing” posted the lowest PMI (41.7).

Seven Secondary Criteria

To calculate PMI, seven secondary criteria were also surveyed by the center, including 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 66.92 in Dey to 76.79 in Bahman and 81.67 in Esfand. All select industries registered PMI reading of higher than 50 in Esfand.

The "warehouse inventory level" sub-index dropped from 56.48 in Dey to 45.86 in Bahman and 39.10 in Esfand.

The “exports” sub-index increased from 38.09 in Dey to 45.17 in Bahman and 49.33 in Esfand.

The “prices of manufactured products” sub-index increased from 47.47 in Dey to 58.13 in Bahman and 62.83 in Esfand.

"Fuel consumption" rose from 47.83 in Dey to 51.86 in Bahman and 55.74 in Esfand.

"Sales level" improved from 32.21 in Dey to 49.53 in Bahman and 63.65 in Esfand.

The “production expectations for the month ahead” sub-index dropped from 55.24 in Dey to 53.81 in Bahman and 32.40 in Esfand, which is its lowest PMI over the past six months.

The overall PMI index for industries improved from 39.35 in Dey to 47.63 in Bahman and 55.36 in Esfand.

The PMI, among the most exact 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.