Retail Sector's PMI Plummets

EghtesadOnline: The Economy and Planning Division of Iran Chamber of Guilds' latest report on Purchasing Managers’ Index for the retail sector shows a significant decline in the economic indicator.

News ID: ۷۵۱۳۵۱

28 October 2020

According to the report, PMI for the retail sector in the sixth month of the current fiscal year (Aug. 22-Sept. 21) settled at 38.78 from 51.19 in the preceding month, indicating a 24.24% decline compared to the previous month, IRNA reported.

A reading above 50 indicates expansion in the sector and below 50 indicates contraction. Traders watch these surveys closely, as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.

A higher than expected reading should be taken as a positive sign for businesspeople while a lower than expected reading is considered as negative.

The retail PMI is based on five major survey fields: "new orders", "raw material inventory", "production", "supplier deliveries" and "employment". To calculate PMI, seven secondary criteria are also surveyed by the center, namely “raw materials purchase prices", "warehouse inventory", "exports", "product price", "fuel consumption", "sales" and "production expectations".

It is measured through a monthly 12-question survey sent to senior executives active in retail sector.

The “raw material inventory” sub-index registered the highest PMI among five main sub-indexes with a reading of 43.88 while “new orders” registered the lowest PMI reading among five main sub-indexes. It stood at 33.67 in the month ending Sept. 21.

The “supplier deliveries” sub-index stood at 38.78 during the month ending Sept. 21 compared with 55.95 of the previous month.

The "warehouse inventory" sub-index increased from 44.05 in the month ending August 21 to 51.02 in the month ending Sept. 21, suggesting that due to the decline in people’s purchasing power, products have remained unsold.

The sub-index measuring "activity expectations for the following month" dropped from 48.81 in the month ending Aug. 21 to 42.86 in the month ending Sept. 21, which is indicative of lack of confidence in the stability of economic conditions.

The "employment" sub-index decreased by 21.24% compared with the preceding month, suggesting that more retailers are falling into recession.

Fluctuations in the foreign exchange rate led to a 17.05% decline in "sales" sub-index in the month ending Sept. 21 compared with the previous month.

The retail sector’s PMI for the fifth month of the current fiscal year settled at 51.19 from 37.50 in the preceding month (June 21-July 21), indicating a 36.51% improvement month-on-month.

Lower demand for durable goods due to coronavirus crisis, decline in people’s purchasing power, lack of transparency in the supply chain, micro-scale nature of economic enterprises, high end-costs, dependency on imports and instability of foreign exchange market as well as high inflation and prices of goods and services were the seven main problems plaguing the retail sector during the month under review, the previous such report read.