Industrial PMI Improves

EghtesadOnline: Purchasing Managers' Index for the seventh month of the current fiscal year (Sept. 23-Oct. 22) settled at 50.97 from 50.43 in the preceding month (Aug. 23-Sept. 22), indicating a 0.54-point or 1.07% increase month-on-month, the Statistics and Economic Analysis Center of the Iran Chamber of Commerce, Industries, Mines and Agriculture has announced.

News ID: ۷۴۸۹۵۵

16 November 2019

The center, known as the Farsi acronym “Shamekh”, is measuring PMI in Iran for the past 13 months.

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.

At present, ICCIMA publishes reports only on Iran’s industrial sector and its 12 subsectors. It plans to survey the entire economic sectors of Iran in the near future.

“Clothing and leather” industry posted the highest PMI with a reading of 58.8 during the month under review while “non-metallic mineral industries” registered the lowest PMI reading with 44.5.

Five Main Sub-Indices

The "production" sub-index for Iran’s industrial sector increased from 43.38 in the fifth fiscal month that ended on Aug. 22 to 50.03 in the sixth Iranian month (Aug. 23-Sept. 22) but relapsed to 49.29 last month.

“Non-metallic minerals industries” recorded the lowest PMI of the “production” sub-index last month (40) while industries categorized as “other industries” had the highest PMI with a reading of 57.1.

The “new orders” sub-index increased from 45.08 in the previous month to 45.32 in the seventh month with the top performing industry for the seventh fiscal month being “clothing and leather” (58.3).

The “supplier deliveries” sub-index, which measures how fast deliveries are made, increased from 55.79 in the fifth month to 59.30 in the sixth month to 60.65 in the seventh month of the Iranian year.

The highest “supplier deliveries” PMI was posted by “clothing and leather” with a reading of 75 and the lowest was recorded for “other industries” with a reading of 50.

The “raw materials inventory levels” sub-index increased from 46.42 in the month ending Sept. 22 to 48.87 in the month leading to Oct. 22.

Five out of 12 industries posted PMI readings below 50 in the seventh month of the current Iranian year.

“Vehicle and auto parts manufacturing” registered the lowest PMI (38.6) among all groups while “plastic and rubber production industries” posted the highest PMI (66.7).

The PMI reading of “employment” sub-index once again stuck above the threshold level last month: It increased from 51.69 in the fifth month to 54.31 in the sixth month to 55.36 in the seventh month.

“Clothing and leather” industry registered the highest PMI (62.5) whereas “vehicle and auto parts manufacturing” posted the lowest PMI (47.1).

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 52.55 in the month ending Aug. 22 to 52.32 in the month ending Sept. 22 to 46.92 in the month ending Oct. 22.

Four groups registered PMI readings of higher than 50 for raw materials’ purchase price index in the seventh fiscal month: The highest PMI was recorded for “other industries” with a reading of 57.1.

The “warehouse inventory level” sub-index rose from 56.92 in the month ending Aug. 22 to 58.03 in the month ending Sept. 22 but decreased to 56.77 last month. The lowest PMI sub-index was recorded for “oil and gas products industries” (44.2) and the highest was registered for “plastic and rubber production” with 79.2.

The “exports” sub-index increased from 45.99 in the month ending Sept. 22 to 46.06 last month.

PMI reading of exports sub-index was the lowest for “oil and gas products industries” (38.5) and highest for “clothing and leather” (58.3).

The “prices of manufactured products” sub-index increased from 38.35 in the fifth fiscal month to 40.95 in the sixth month but fell to 40.59 last month. “Wood, paper and furniture” recorded the lowest PMI of 26.2 during the seventh month of the Iranian year.

The “fuel consumption” sub-index improved from 48.57 in the month ending Aug. 22 to 51.01 in the month ending Sept. 22 to 52.19 last month.

“Other industries” registered the highest PMI (78.6) whereas “oil and gas products industries” posted the lowest PMI (42.3), indicating that the latter group had the lowest fuel consumption by Oct. 22.

The “sales level” sub-index increased from 37.85 in the fifth month to 46.14 in the sixth month but slid to 44.02 in the seventh month.

All but one industry, namely chemical industries, recorded PMI readings below 50. “Textile industries” recorded the lowest PMI reading of 32.1.

The sub-index for “production forecasts for the next month” increased from 62.16 in the month ending Aug. 22 to 65.23 in the month ending Sept. 22, but declined to 62.32 in the month ending Oct. 22.

Among the 12 groups, “clothing and leather” registered the highest PMI reading of 75 in the seventh fiscal month while “non-metallic minerals industries” recorded the lowest PMI of 52.5.

The overall PMI for industries improved from 45.79 in the month ending Aug. 22 to 50.43 in the month ending Sept. 22 to 50.97 in the month ending Oct. 22.

PMI, among the most precise indicators showcasing a country’s economic condition, 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 percentage of answers reporting an improvement, P2 is percentage of answers reporting no change and P3 is percentage of answers reporting a deterioration.