PMI for Industrial Sector Slips in 7th Fiscal Month

EghtesadOnline: The Purchasing Managers’ Index for the industrial sector of Iran during the seventh month of the current fiscal year (Sept. 22-Oct. 21) settled at 52.22 from 54.53 in the preceding month (Aug. 22-Sept. 21), indicating a 2.31-point or a 4.24% decrease.

News ID: ۷۵۱۴۵۹

11 November 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 for the past 25 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.

Metal industries posted the highest PMI with a reading of 59.1 during the month under review, while oil and gas products industries registered the lowest PMI reading with 40.9.

Five Main Sub-Indices

The “production” sub-index for Iran’s industrial sector increased from 46.23 in the fifth month (July 22-Aug. 21) to 56.17 in the sixth month (Aug. 22-Sept. 21), but decreased to 52.16 in the seventh month (Sept. 22-Oct. 21).

Industries classified as “others” recorded the highest PMI of the “production” sub-index in the month under review (64.3) while oil and gas products industries registered the lowest PMI with a reading of 40.

The “new orders” sub-index improved from 44.23 in the month ending Aug. 21 to 57.48 in the month ending Sept. 21, but fell to 55.42 in the month ending Oct. 21, with the top performing industries being textile (65) and worst being oil and gas products industries (38%).

The “supplier deliveries” sub-index, which measures how fast deliveries are made, increased from 55.49 in the month ending Aug. 21 to 56.72 in the month ending Sept. 21, but dropped to 54.66 in the month ending Sept. 21.

The highest “supplier deliveries” PMI was posted by industries categorized as “others” with a reading of 71.4 and the lowest was recorded for clothing and leather industries with a reading of 45.8.

The “raw material inventory” sub-index slid from 43.09 in the month ending Aug. 21 to 41.01 in the month ending Sept. 21 and to 37.46 in the month ending Oct. 21. In fact, the raw material inventory sub-index hit its six-month lows in the month under review.

Chemical industries posted the highest PMI (42.1) while oil and gas products industries registered the lowest PMI reading of 18 among all groups.

The PMI reading of “employment” sub-index was above the threshold. It improved from 52.98 in the month ending Aug. 21 to 53.17 in the month ending Sept. 21, but fell to 53.08 in the month ending Oct. 21.

Vehicle and auto parts manufacturing industries posted the highest “employment” PMI reading (65.5) whereas wood, paper and furniture industries and non-metallic mineral industries posted the lowest PMI of the sub-index (43.3).

Seven Secondary Criteria

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 increased from 88.63 in the month ending Aug. 21 to 93.08 in the month ending Sept. 21 to 94.82 in the month ending Oct. 21. The sub-index hit its all-time high since the earliest data on industries sector PMI became available about 25 months ago.

All 12 groups registered PMI readings of higher than 50 for this sub-index in the seventh fiscal month. The highest PMI was recorded for textile industries and clothing and leather industry with a reading of 100 and the lowest for rubber and plastic industries with 86.4.

The “warehouse inventory” sub-index shrank from 51.28 in the month ending Aug. 21 to 49.13 in the month leading to Sept. 21 and to 45.20 in the month ending Oct. 21.

The highest PMI reading for this sub-index was registered for non-metallic minerals with 60 and the lowest PMI reading was recorded for oil and gas products with 24.

The “exports” sub-index increased from 46.32 in the month ending Aug. 21 to 47.44 in the month ending Sept. 21, but slid to 47.03 in the month ending Oct. 21.

PMI reading of “exports” sub-index was the highest for textile industries (55) and the lowest for oil and gas products (38).

The “prices of manufactured products” sub-index increased from 66.01 in the month ending Aug. 21 to 70.80 in the month ending Sept. 21 to 74.81 in the month ending Oct. 21.

Textile industries recorded the highest PMI of 90 for this sub-index during the seventh month of the Iranian year while non-metallic minerals posted the lowest PMI reading of 66.7.

The “fuel consumption” sub-index climbed from 53 in the month ending Aug. 21 to 53.79 in the month ending Sept. 21 and to 56.69 in the month ending Oct. 21.

Industries categorized as “others” registered the highest PMI measured for fuel consumption in the month under review (71.4) while oil and gas products industries registered the lowest (36).

The “sales” sub-index increased from 44.97 in the fifth fiscal month to 55.38 in the month ending Sept. 21, but dropped to 49.98.

Textile industries posted the highest “sales” PMI with a reading of 65 while oil and gas products industries registered the lowest PMI with a reading of 32.

The “production forecasts for the following month” sub-index declined from 58.62 in the month ending Aug. 21 to 52.28 in the month ending Sept. 21, but improved to 57.36 in the month ending Oct. 21.

Eight groups reported a PMI reading of above 50 for this sub-index with vehicle and auto parts manufacturing industries registering the highest PMI reading of 72.4 and clothing and leather the lowest PMI reading of 41.7.

The overall PMI for industries increased from 48.06 in the month leading to Aug. 21 to 54.53 in the month leading to Sept. 21, but fell to 52.22 in the month ending Oct. 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.