Industrial PPI Inflation Hits Record High in Second Quarter

EghtesadOnline: The overall Producer Price Index of the industrial sector stood at 805.4 in the second quarter of the current year (June 21-Sept. 21), indicating a 37% increase compared with the previous quarter – the highest quarter-on-quarter rise since the fiscal 2013-14, when the earliest available data on producers' inflation became available in Iran.

News ID: ۷۵۱۴۰۳

04 November 2020

The year-on-year PPI inflation in summer this year was at 47.4%.

The sector’s QOQ and year-on-year PPI for the quarter to June 20, which marked the end of Q1 of the current Iranian year, had increased by 8.1% and 7.8%, respectively.

According to the Statistical Center of Iran, the lowest quarterly PPI inflation rates were recorded for “production of tobacco and cigarettes” subsector with 0% and “print and publication of recorded media” with 7.1% in Q2.

The highest quarterly PPI inflation rates were posted for “coal production industries-oil refineries” with 57%, “manufacturing of office machinery” with 43.6% and “production of base metals” with 43.5%.

The lowest year-on-year PPI inflation rate was registered for “production of tobacco and cigarettes” subsector with 15% and the highest increase was posted by “manufacturing of office machinery” with 172.4%, “production of base metals” with 108.4%, “manufacturing of transportation vehicles” with 94.7%, “production of electricity generating machines and transformers” with 81.6%, “production of furniture” with 75.4% and production of “fabric metal products except for machinery” with 72.3% compared with the same quarter of last year.

The industrial PPI in the four-quarter period ending Sept. 21 grew by 24% compared with the same period of last year. The sector’s PPI for the four-quarter period to June 20 had increased by 23.8%.

The lowest average annual PPI inflation was recorded by “coal production industries-oil refineries” with -0.2% and the highest increase was reported for “manufacturing of office machinery” with 130.1%, “manufacturing of transportation vehicles” with 59.7% and “production of base metals” with 56.5%.

PPI represents the average movement in selling prices from domestic production over time. It measures price movements from the seller's viewpoint.

Conversely, the consumer price index measures cost changes from the consumer’s viewpoint. In other words, this index tracks change to the cost of production.

Just to get an idea of consumers' inflation in Iran for the sake of comparison, data provided by SCI show the average goods and services Consumer Price Index in the 12-month period ending Sept. 21, which marks the end of the sixth Iranian month, increased by 26% compared with the corresponding period of last year.

SCI had put the average annual inflation rate for the preceding Iranian month that ended on Aug. 21 at 25.8%.

The consumer inflation for the month under review (Aug. 22-Sept. 21, 2020) registered an increase of 34.4% compared with the similar month of the previous Iranian year. The year-on-year inflation of the month ending Aug. 21 was 30.4%.

The overall CPI (using the Iranian year to March 2017 as the base year) stood at 244.3 last month, indicating a 3.6% rise compared with the month before. Month-on-month consumer inflation was 3.5% for the preceding month (July 22-Aug. 21).

The highest monthly growth in the index among 12 groups of the basket of consumer goods and services purchased by households in the Iranian month ending Sept. 21 was recorded for “transportation” with 8.4% and the lowest monthly growth for “tobacco” with 1.4%

The highest and lowest year-on-year inflation in the month under review was posted for transportation (80.8%) and communications (16.8%) and the highest and lowest average annual inflation was registered for transportation (51.5%) and communications (6.2%) respectively.

SCI put average annual inflation for urban and rural areas at 26.1% and 25.4%, respectively.

CPI registered a year-on-year increase of 34.5% for urban areas and 34.1% for rural areas in the month ending Sept. 21.

The overall CPI reached 243.1 for urban households and 251 for rural households, indicating a month-on-month increase of 3.6% and 3.5% for urban and rural areas, respectively.

Industrial PMI Stuck Around Threshold

The Purchasing Managers’ Index for the industrial sector during Aug. 22-Sept. 21 settled at 54.53 from 48.06 in the preceding month (July 22-Aug. 21), indicating a 6.47-point or a 13.4% increase.

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 for the past 24 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 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.

Vehicle and auto parts manufacturing industries posted the highest PMI with a reading of 60.4 in the last fiscal month while petroleum and gas products industries registered the lowest PMI reading with 44.

Five Main Sub-Indices

The "production" sub-index for Iran’s industrial sector decreased from 56.47 in the fourth month (June 21-July 21) to 46.23 in the fifth month (July 22-Aug. 21) but improved to 56.17 in the sixth month (Aug. 22-Sept. 21).

Industries classified as "others" recorded the highest PMI of the "production" sub-index last month (66.7) while petroleum and gas products industries registered the lowest PMI with a reading of 40.

The "new orders" sub-index fell from 58.85 in the month ending July 21 to 44.23 in the month ending Aug. 21 but improved to 57.48 in the month ending Sept. 21, with the top performing industries being chemicals (64.4) and the worst being clothing and leather industries (42.3).

The "supplier deliveries" sub-index, which measures how fast deliveries are made, increased from 54.85 in the month ending July 21 to 55.49 in the month ending Aug. 21 to 56.72 in the month ending Sept. 21.

The highest "supplier deliveries" PMI was posted by wood, paper and furniture industries with a reading of 67.6 and the lowest was recorded for textile industries with a reading of 38.9.

The "raw material inventory" sub-index jumped from 39.53 in the month ending July 21 to 43.09 in the month ending Aug. 21 but slid to 41.01 in the month ending Sept. 21.

Non-metallic mineral industries and industries categorized as “others” posted the highest PMI (50) while textile industries registered the lowest PMI reading of 22.2 among all groups.

The PMI reading of "employment" sub-index was above the threshold last month. It dropped from 56.49 in the month ending July 21 to 52.98 in the month ending Aug. 21 but rebounded to 53.17 in the month ending Sept. 21.

Industries classified as "others" posted the highest PMI reading (66.7) whereas wood, paper and furniture posted the lowest PMI of employment sub-index (35.3).

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 94.74 in the month ending July 21 to 88.63 in the month ending Aug. 21 but climbed to 93.08 in the month ending Sept. 21.

All 12 groups of industries under study registered PMI readings of higher than 50 for "raw material purchase price" sub-index in the sixth fiscal month. The highest PMI was recorded for textile industries, wood, paper and furniture industries and clothing and leather industries with a reading of 100 and the lowest for rubber and plastic industries with 80.

The "warehouse inventory" sub-index increased from 44.27 in the month ending July 21 to 51.28 in the month ending Aug. 21 but fell to 49.13 in the month leading to Sept. 21.

The highest PMI reading for "warehouse inventory" sub-index was registered for non-metallic minerals with 62.5 and the lowest PMI reading was recorded for rubber and plastic with 35.

The "exports" sub-index decreased from 49.45 in the month ending July 21 to 46.32 in the month ending Aug. 21 but rose to 47.44 in the month ending Sept. 21.

PMI reading of "exports" sub-index was the highest for rubber and plastic industries (55) and the lowest for textile industries (38.9).

The "prices of manufactured products" sub-index decreased from 76.16 in the month ending July 21 to 66.01 in the month ending Aug. 21 but grew to 70.80 in the month ending Sept. 21.

Textile industries recorded the highest PMI of 94.4 for the prices of manufactured products sub-index during the sixth month of the Iranian year while industries classified as “others” posted the lowest PMI reading of 41.7.

The "fuel consumption" sub-index sank from 61.83 in the month ending July 21 to 53 in the month ending Aug. 21 but climbed to 53.79 in the month ending Sept. 21.

Industries categorized as "others" registered the highest PMI measured for fuel consumption last month (66.7) while petroleum and gas products industries registered the lowest (40).

The "sales" sub-index decreased from 57.28 in the fourth fiscal month to 44.97 in the fifth fiscal month but increased to 55.38 in the month ending Sept. 21.

Clothing and leather posted the highest sales PMI with a reading of 65.4 while industries classified as "others" registered the lowest PMI with a reading of 33.3.

The "production forecasts for the following month" sub-index improved from 51.37 in the month ending July 21 to 58.62 in the month ending Aug. 21 but slid to 52.28 in the month ending Sept. 21.

Six groups reported PMI reading above 50 for "production forecasts for the following month" sub-index with wood, paper and furniture industries registering the highest PMI reading of 64.7 and textile industries the lowest PMI reading of 22.2.

The overall PMI for industries decreased from 55.25 in the month ending July 21 to 48.06 in the month leading to Aug. 21 but improved to 54.53 in the month leading to Sept. 21.