PMI Shows Industries Recovering From Steep Slump

EghtesadOnline: Iranian industries are seeing significant improvement in their latest indices from purchasing manager surveys after steep declines earlier in the current fiscal year (started March 20).

News ID: ۷۵۰۲۶۰

16 June 2020

The Purchasing Managers’ Index for the second month of the current fiscal year (April 20-May 20) settled at 63.21 from 28.06 in the preceding month (March 20-April 19), indicating a 125% increase month-on-month, according to the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture.

The center has been measuring PMI, known by its Farsi acronym Shamekh, in Iran for the past 20 months.

PMI is an indicator of economic health for manufacturing and services sectors. It provides information about current business conditions to companies’ decision-makers, analysts and purchasing managers.

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. The further PMI moves away from 50, the greater the level of change.

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.

The index 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 (10%), production (25%), supplier deliveries (15%) and employment (20%).

The survey poses 12 questions about business conditions and any changes, whether it is improving, no changes or deteriorating.

Machinery and home appliance industries posted the highest PMI with a reading of 73 during the month under review while industries classified as “others” registered the lowest PMI reading with 46.7; all other groups posted PMI readings above the threshold level.

Five Main Sub-Indices

The "production" sub-index for Iran’s industrial sector decreased from 39.09 in last fiscal year’s 12th month (Feb. 20-March 19) to 20.37 in the first month of the current Iranian year (March 20-April 19) but rebounded to 71.92 in the second month of the current year (April 20-May 20).

Machinery and home appliance industries recorded the highest PMI of the "production" sub-index last month (85.7) while petroleum and gas products registered the lowest PMI with a reading of 58.

The "new orders" sub-index tumbled from 41.43 in the month leading to March 19 to 22.03 in the month ending April 19 but jumped to 65.85 in the month ending May 20, with the top performing industries being rubber and plastic industries (83.3).

The "supplier deliveries" sub-index, which measures how fast deliveries are made, dropped from 50.54 in the month ending March 19 to 30.19 in the month ending April 19 but improved to 65.82 in the month ending May 20.

The highest "supplier deliveries" PMI was posted by non-metallic mineral industries with a reading of 75 and the lowest was recorded for petroleum and gas products with a reading of 54.

The "raw material inventory" sub-index declined from 41.01 in the month ending March 19 to 32.83 in the month ending April 19, but improved to 43.52 in the month ending May 20.

Industries classified as "others" registered the PMI reading of zero among all groups while clothing and leather posted the highest PMI (59.1).

The PMI reading of "employment" sub-index moved above the threshold last month. It fell from 43.02 in the month ending March 19 to 42.72 in the month ending April 19 but increased to 56.24 in the month ending May 20.

Machinery and home appliance industries registered the highest PMI reading (66.1) whereas clothing and leather posted the lowest PMI (40.9).

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 75.99 in the month ending March 19 to 70.95 in the month ending April 19 but surged to 86.78 in the month ending May 20.

All 12 groups registered PMI readings of higher than 50 for raw material purchase price sub-index in the second fiscal month: The highest PMI was recorded for non-metallic mineral industries and those categorized under “others” with a reading of 100 and the lowest for textile industries with 65.

The "warehouse inventory" sub-index fell from 44.43 in the month ending March 19 to 42.87 in the month ending April 19 but jumped to 51.27 in the month ending May 20.

The lowest PMI sub-index was recorded for machinery and home appliances (42.9) and the highest was registered for textile industries with 65.

The "exports" sub-index sank from 39 in the month ending March 19 to 32.31 in the month ending April 19 but rose to 46.25 in the month ending May 20.

PMI reading of “exports” sub-index was the lowest for industries classified as “others” (33.3) and highest for machinery and home appliances (51.8).

The "prices of manufactured products" sub-index decreased from 55.32 in the month ending March 19 to 49.87 in the month ending April 19 but grew to 66.44 in the month ending May 20.

Textile industries and wood, paper and furniture recorded the highest PMI of 75 during the second month of the Iranian year while petroleum and gas products posted the lowest PMI reading of 46.

The "fuel consumption" sub-index dropped from 42.83 in the month leading to March 19 to 30.36 in the month ending April 19 but soared to 66.21 in the month ending May 20.

Machinery and home appliances registered the highest PMI measured for fuel consumption last month (71.4) while petroleum and gas products registered the lowest (58).

The "sales" sub-index declined from 40.96 in the 12th fiscal month of the last year to 18.28 in the first month of the current year but rocketed to 68.77 in the second month of the current year.

Textile industries posted the highest PMI with a reading of 85 and “others” registered the lowest PMI with a reading of 16.7.

The "Production forecasts for the following month" sub-index jumped from 27.52 in the month ending March 19 to 69.11 in the month ending April 19 but slid to 63.12 in the month ending May 20.

Ten groups reported PMI reading above 50 for production forecasts for the following month’s sub-index with rubber and plastic industries registering the highest PMI reading of 79.2 and industries categorized as “others” the lowest PMI reading of 33.3.

The overall PMI for industries fell from 42.48 in the month ending March 19 to 28.06 in the month ending April 19 but increased to 63.21 in the Iranian month ending May 20, showing signs of recovery from coronavirus after the lockdowns were lifted.