Business Activities Rebound

EghtesadOnline: The Purchasing Managers’ Index, known by its Farsi acronym Shamekh, for Iran’s overall economy rebounded in the second month of the current fiscal year (April 20-May 20), thanks to a jump in output as companies resumed production after the coronavirus lockdowns and the new Iranian year’s holidays, the Statistics and Economic Analysis Center of the Iran Chamber of Commerce, Industries, Mines and Agriculture reported.

News ID: ۷۵۰۲۳۶

14 June 2020

The overall PMI fell from 31.39 in the month ending March 19 to 28.68 in the month leading to April 19 but improved to 50.17 in the month ending May 20, showing the economy’s recovery from the pandemic is gathering pace.

The headline PMI is a number from 0 to 100, such that over 50 shows an expansion of the economy when 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, providing information about business conditions to company directors, analysts and purchasing managers.

According to the report, the “business output” sub-index, which had fallen from 28.10 in the 12th month of last fiscal year (Feb. 20-March 19, 2020) to 21.67 in the first month of the current year (March 20-April 19, 2020), climbed to 55.22 in the second Iranian month (April 20-May 20, 2020).

The "new orders" sub-index dropped from 28.60 in the 12th month of the last year to 21.45 in the first month of the current year but rebounded to 51.36 in the second fiscal month.

The "supplier deliveries" sub-index, which measures how fast deliveries are made, decreased from 36.51 in the month ending March 19 to 33.49 in the month ending April 19 but surged to 53.19 in the month ending May 20.

The "raw materials inventory" sub-index fell from 32.23 in the month ending March 19 to 25.57 in the month ending April 19, but increased to 37.12 in the month ending May 20.

The PMI reading of "employment" sub-index rose from 35.42 in the 12th month of the last year to 46.22 in the first month of the current Iranian year to 46.35 in the second Iranian month of the current year.

To calculate PMI, seven secondary criteria were 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 increased from 61.98 in the month ending March 19 to 70.69 in the month ending April 19 to 89.05 in the month ending May 20.

The "warehouse inventory" sub-index grew from 36.30 in the month ending March 19 to 37.64 in the month ending April 19 to 48.99 in the month ending May 20.

The "exports" sub-index dropped from 30.30 in the 12th month of the last year to 28.72 in the first month of the current year but jumped to 43.74 in the second month.

The prices of manufactured products or services sub-index increased from 44.98 in the 12th month to 48.65 in the month ending April 19 to 65.11 in the month ending May 20.

The "fuel consumption" sub-index tumbled from 35.37 in the month ending March 19 to 33.83 in the month ending April 19, but soared to 57.52 in the month ending May 20.

The "sales" sub-index declined from 29.17 in the month ending March 19 to 17.17 in the month leading to April 19 but climbed to 55.50 in the month leading to May 20.

The "Business Output Forecasts for the Following Month" sub-index improved from 23.82 in the month ending March 19 to 56.42 in the month ending April 19 to 58.70 in the month ending May 20.

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.