PMI Trend Implies Slow Recovery

EghtesadOnline: The overall Purchasing Managers’ Index, known by its Farsi acronym Shamekh, for the economy settled at 46.86 in the month ending Sept. 21 from 46.43 in the month ending Aug. 21, indicating 0.43 points or 0.93% improvement.

News ID: ۷۵۱۲۲۶

10 October 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, indicates that despite the slight improvement, problems associated with raw material inventory have worsened over the month.

The headline PMI is a number from 0 to 100, such that over 50 shows an 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, aiming to provide information about business conditions to company directors, analysts and purchasing managers.

According to the report, the "business output" sub-index increased from 46.40 in the fourth Iranian month (June 21-July 21) to 47.58 in the fifth month (July 22-Aug. 21) to 48.98 in the sixth month (Aug. 22-Sept. 21).

The "new orders" sub-index fell from 44.39 in the fourth month to 41.53 in the fifth month, but rebounded to 46.93 in the sixth month.

The "supplier deliveries" sub-index, which measures how fast deliveries are made, increased from 47.71 in the month ending July 21 to 53.28 in the month ending Aug. 21 but fell to 48.50 in the month ending Sept. 21.

The "raw materials inventory" sub-index climbed from 35.29 in the month ending July 21 to 40.24 in the month ending Aug. 21 but fell to 35.64 in the month ending Sept. 21.

The PMI reading of "employment" sub-index increased from 49.37 in the month ending July 21 to 50.32 in the month ending Aug. 21, but slid to 48.46 in the month ending Sept. 21.

To calculate PMI, seven secondary criteria were 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 rose from 89.52 in the month ending July 21 to 90.27 in the month ending Aug. 21, but decreased to 88.75 in the month ending Sept. 21.

The "warehouse inventory" sub-index improved from 42.78 in the month ending July 21 to 48.40 in the month ending Aug. 21, but plummeted to 43.01 in the month ending Sept. 21.

The "exports" sub-index increased from 42.88 in the fourth fiscal month to 42.91 in the fifth fiscal month, but decreased to 41.56 in the sixth fiscal month.

The "prices of manufactured products or services" sub-index decreased from 70.05 in the month ending July 21 to 64.26 in the month ending Aug. 21, but went up to 72.33 in the month ending Sept. 21.

The "fuel consumption" sub-index increased from 52.92 in the month ending July 21 to 54.44 in the month ending Aug. 21, but fell to 53.47 in the month ending Sept. 21.

The "sales" sub-index declined from 44.69 in the month ending July 21 to 43.45 in the month ending Aug. 21, but improved to 46.20 in the month ending Sept. 21.

The sub-index entitled as "business output forecasts for the following month" improved from 44.64 in the month ending July 21 to 51.55 in the month leading to Aug. 21, but dropped to 44.51 in the month ending Sept. 21.

The overall PMI improved from 45.47 in the month ending July 21 to 46.43 in the month ending Aug. 21 to 46.86 in the month leading to Sept. 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.