Iran’s PMI Contracts 6.4%

EghtesadOnline: The overall Purchasing Managers’ Index, known by its Farsi acronym Shamekh, for the Iranian economy settled at 45.47 in the month ending July 21 from 48.41 in the month ending June 20, indicating a 2.93-point or 6.42% contraction.

News ID: ۷۵۰۶۴۶

09 August 2020

A report by the Statistics and Economic Analysis Center of the Iran Chamber of Commerce, Industries, Mines and Agriculture, the sponsor and coordinator of the survey, blames the shortage and increase in raw material purchase prices as the main factor behind the contraction in economic activities during the last month.

The Purchasing Managers' Index is an indicator of economic health for manufacturing and service sectors.

The headline PMI is a number from 0 to 100, such that over 50 shows economic expansion 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, guiding company directors, analysts and purchasing managers.

According to the report, the "business output" sub-index decreased from 55.22 in the second month of the current Iranian year (April 20-May 20) to 51.05 in the third month (May 21-June 20) to 46.4 in the fourth month (June 21-July 21).

The "new orders" sub-index fell from 51.36 in the second fiscal month to 49.28 in the third month to 44.39 in the fourth month.

The "supplier deliveries" sub-index, which measures how fast deliveries are made, dropped from 53.19 in the month ending May 20 to 52.07 in the month ending June 20 to 47.71 in the month ending July 21.

The "raw materials inventory" sub-index climbed from 37.12 in the month ending May 20 to 40.99 in the month ending June 20, but fell to 35.29 in the month ending July 21.

The PMI reading of "employment" sub-index decreased from 46.35 in the second Iranian month of the current year to 44.76 in the month ending June 20 but increased to 49.37 in the month ending July 21.

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 89.05 in the month ending May 20 to 91.94 in the month ending June 20 but fell to 89.52 in the month ending July 21.

The "warehouse inventory" sub-index dropped from 48.99 in the month ending May 20 to 48.40 in the month leading to June 20 to 42.78 in the month ending July 21.

The "exports" sub-index improved from 43.74 in the second month to 43.96 in the third fiscal month, but slid to 42.88 in the fourth fiscal month.

The "prices of manufactured products or services" sub-index increased from 65.11 in the month ending May 20 to 71.39 in the month ending June 20 but dropped to 70.05 in the month ending July 21.

The "fuel consumption" sub-index rose from 57.52 in the month ending May 20 to 57.87 in the month ending June 20, but declined to 52.92 in the month ending July 21.

The "sales sub-index" declined from 55.50 in the month leading to May 20 to 47.69 in the month ending June 20 to 44.69 in the month ending July 21.

The sub-index titled "business output forecasts for the following month" plunged from 58.70 in the month ending May 20 to 50.83 in the month ending June 20 to 44.64 in the month ending July 21.

The overall PMI dropped from 50.17 in the month ending May 20 to 48.41 in the month ending June 20 to 45.47 in the month ending July 21.

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.