Iran's Industrial PMI Drops for Second Consecutive Month

EghtesadOnline: The Purchasing Managers’ Index for industries during the fourth month of the current fiscal year (June 21-July 21) settled at 55.25 from 56.80 in the preceding month (May 21-June 20), indicating a 2.73% decrease.

News ID: ۷۵۰۶۷۳

11 August 2020

The announcement was made by the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture. The center is measuring PMI, known by its Farsi acronym Shamekh, in Iran since past 22 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 compared with the previous month. A PMI reading under 50 represents a contraction, and a reading at 50 indicates no change. The further away from 50, the greater the level of change.

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 (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.

"Wood, paper and furniture industries" posted the highest PMI with a reading of 61.9 during the month under review while "clothing and leather" registered the lowest PMI reading with 46.5.

Five Main Sub-Indices

The "production" sub-index for Iran’s industrial sector decreased from 71.92 in the second month of the current year (April 20-May 20) to 58.69 in the third month of the year (May 21-June 20) to 56.47 in the fourth month of the current year (June 21-July 21).

Industries classified as "others" recorded the highest PMI of the "production" sub-index (78.6) while "clothing and leather" registered the lowest PMI with a reading of 45.8.

The "new orders" sub-index fell from 65.85 in the month ending May 20 to 59.62 in the month ending June 20 to 58.85 in the month ending July 21, with the top performing industries being "wood, paper and furniture" (72.5) and the worst being "clothing and leather" (33.3).

The "supplier deliveries" sub-index, which measures how fast deliveries are made, decreased from 65.82 in the month ending May 20 to 58.53 in the month ending June 20 to 54.85 in the month ending July 21.

The highest PMI in the category was posted by "clothing and leather industries" with a reading of 66.7 and the lowest was recorded for "rubber and plastic" with a reading of 42.3.

The "raw material inventory" sub-index dropped from 43.52 in the month ending May 20 to 42.96 in the month ending June 20 to 39.53 in the month ending July 21.

"Wood, paper and furniture" posted the highest PMI (55) while "textile industries" registered the lowest PMI reading of 10.7 among all groups.

The PMI reading of "employment" sub-index was above the threshold last month. It fell from 56.24 in the month ending May 20 to 55.81 in the month ending June 20, but rebounded to 56.49 in the month ending July 21.

Industries classified as "others" posted the highest PMI reading (71.4) whereas petroleum and gas product industries posted the lowest PMI (46.2).

Seven Secondary Criteria

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 materials purchase prices" sub-index increased from 86.78 in the month ending May 20 to 92.91 in the month ending June 20 to 94.74 in the month ending July 21.

All 12 groups registered PMI readings of higher than 50 for "raw material purchase price" sub-index in the fourth fiscal month: The highest PMI was recorded for "vehicle and auto parts manufacturing industries" with a reading of 98.6 and the lowest for industries categorized as "others" with 85.7.

The "warehouse inventory" sub-index decreased from 51.27 in the month ending May 20 to 46.75 in the month ending June 20 to 44.27 last month.

The lowest PMI reading for "warehouse inventory" sub-index was recorded for "metal industries" with 34.3 and the highest was registered for "clothing and leather" with 62.5.

The "exports" sub-index rose from 46.25 in the month ending May 20 to 47.30 in the month ending June 20 to 49.45 in the month ending July 21.

PMI reading of "exports" sub-index was the highest for "textile industries" (64.3) and the lowest for industries categorized as "others" (35.7).

The "prices of manufactured products" sub-index increased from 66.44 in the month ending May 20 to 72.43 in the month ending June 20 to 76.16 in the month ending July 21.

"Petroleum and gas product industries" recorded the highest PMI of 88.5 during the fourth month of the Iranian year while industries classified as "others" posted the lowest PMI reading of 50.

The "fuel consumption" sub-index slid from 66.21 in the month ending May 20 to 58.95 in the month ending June 20, but increased to 61.83 in the month ending July 21.

Industries categorized as "others" registered the highest PMI measured for "fuel consumption" last month (78.6) while "rubber and plastic" registered the lowest (50).

The "sales" sub-index plunged from 68.77 in the second month of the current year to 54.11 in the third month, but climbed to 57.28 in the fourth fiscal month.

"Wood, paper and furniture" posted the highest sales PMI with a reading of 70 and “clothing and leather” registered the lowest PMI with a reading of 37.5.

The "production forecasts for the following month" sub-index fell from 63.12 in the month ending May 20 to 60.86 in the month ending June 20 to 51.37 in the month ending July 21.

Four groups reported PMI reading above 50 for "production forecasts for the following month" sub-index with "non-metallic mineral industries" registering the highest PMI reading of 75 and "clothing and leather" the lowest PMI reading of 29.2.

The overall PMI for industries decreased from 63.21 in the Iranian month ending May 20 to 56.80 in the month ending June 20 to 55.25 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.