Iran: Purchasing Managers' Index Bounces Back

EghtesadOnline: The Purchasing Managers' Index for the sixth month of the current fiscal year (Aug. 23-Sept. 22) settled at 50.43 from 45.79 in the preceding month (July 23-Aug. 22), indicating a 4.64-point or 10.13% increase month-on-month, the Statistics and Economic Analysis Center of the Iran Chamber of Commerce, Industries, Mines and Agriculture reported.

News ID: ۷۴۸۶۷۲

09 October 2019

The overall PMI for industries fell from 50.07 in the month ending July 22 to 45.79 in the month ending August 22, but increased to 50.43 last month.

It is 12 months now that the center is measuring PMI in Iran, under the Farsi acronym “Shamekh”. PMI is an indicator of economic health for manufacturing and services sectors. It aims to provide information about current business conditions to company decision-makers, analysts and purchasing managers.

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

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 (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.

“Vehicle and auto parts manufacturing” industry posted the highest PMI with a reading of 57.5 during the month under review while “other industries” registered the lowest PMI reading with 36.8.

At present, ICCIMA publishes reports only on Iran’s industrial sector and its 12 subset fields. It plans to survey services and agricultural sectors in the near future.

Iran Chamber of Cooperatives will soon start publishing monthly reports of Purchasing Managers’ Index, under the Farsi acronym "Shamekh", on Iran’s real-estate development, Ali Moti-Jahani, an official with ICC, was recently quoted as saying by IRNA.

The first of this report will provide information about current housing conditions for the Iranian month ending Oct. 22, he added.

Five Main Sub-Indices

The "production" sub-index for Iran’s industrial sector fell from 48.67 in the fourth month of the current Iranian year (ended July 22) to 43.38 in the following month and then improved to 50.03 in the sixth Iranian month.

“Wood, paper and furniture” and “other industries” recorded the lowest PMI of the “production” sub-index last month (35.7) while “clothing and leather” had the highest PMI with a reading of 57.1.

The “new orders” sub-index increased from 39.60 in the previous month to 45.08 in the sixth month with the top performing industry for the sixth fiscal month being “vehicle and auto parts manufacturing” (60).

The “supplier deliveries” sub-index, which measures how fast deliveries are made, decreased from 59.39 in the fourth month to 55.79 in the fifth month, but rebounded to 59.30 in the sixth month of the Iranian year.

The highest “supplier deliveries” PMI was posted by “wood, paper and furniture” and “clothing and leather” with a reading of 71.4 and the lowest was recorded for “chemical industries” with a reading of 50.8.

The “raw materials inventory levels” sub-index increased from 43.62 in the month ending Aug. 22 to 46.42 in the month ending Sept. 22.

Eight out of 12 industries posted PMI readings below 50 in the sixth month of the current Iranian year. Industries included in “other industries” registered the lowest PMI (7.1) among all groups.

The PMI reading of “employment” sub-index rose above the threshold level last month: It increased from 51.69 in the fifth month to 54.31 in the sixth month.

“Clothing and leather” industry registered the highest PMI (64.3) whereas “metal industries” posted the lowest PMI (49.3).

Seven Secondary Criteria

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

The “raw materials purchase prices” sub-index decreased from 60.46 in the month ending July 22 to 52.55 in the month ending Aug. 22 to 52.32 last month.

Four groups registered PMI readings of higher than 50 for raw materials’ purchase price index in the sixth fiscal month: the highest PMI was recorded for “non-metallic minerals industries” with a reading of 72.5.

The “warehouse inventory level” sub-index rose from 54.36 in the month ending July 22 to 56.92 in the month ending Aug. 22 to 58.03 last month. The lowest PMI sub-index was recorded for “other industries” (42.9) and the highest was registered for “clothing and leather” with 82.1.

The “exports” sub-index declined 46.41 in the month ending July 22 to 44.65 in the month ending Aug. 22 but improved to 45.99 last month.

The PMI reading of exports sub-index was the lowest for “clothing and leather” (39.3) and highest for “plastic and rubber production” (56.7).

The “prices of manufactured products” sub-index decreased from 50.07 to 38.35 in the fifth fiscal month, but improved to 40.95 last month. “Clothing and leather” recorded the lowest PMI of 25 during the sixth month of the Iranian year.

The “fuel consumption” sub-index slid from 54.96 in the month ending July 22 to 48.57 in the month ending Aug. 22 but increased to 51.01 last month.

“Clothing and leather” registered the highest PMI (60.7) whereas “textile industries” posted the lowest PMI (40.9), indicating that the latter group had the lowest fuel consumption by Sept. 22.

The “sales level” sub-index declined from 43.45 in the fourth fiscal month to 37.85 in the fifth but increased to 46.14 in the sixth month.

All but two industries, namely vehicle and auto parts manufacturing (66.7) and clothing and leather (50), recorded a PMI reading of below 50. “Textile industries” recorded the lowest PMI reading of 13.6.

The “production forecasts for the next month” sub-index increased from 58.06 in the month ending July 22 to 62.16 in the month ending Aug. 22 to 65.23 last month.

Among the 12 groups, “textile industries” registered the highest PMI of 72.7 in the sixth fiscal month while “non-metallic minerals industries” recorded the lowest PMI of 57.5.

Among the most precise indicators showcasing a country’s economic condition, PMI was first devised by the Institute for Supply Management in USA 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.