Slight Upturn in Economy’s PMI

EghtesadOnline: The overall Purchasing Managers’ Index, known by its Farsi acronym Shamekh, for the overall economy settled at 45.70 in the month ending Nov. 20 from 44.47 in the month ending Oct. 21, indicating an improvement of 1.23 points or 2.77%.

News ID: ۷۵۱۶۶۳

08 December 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, shows prices of raw materials and producer goods declined for the first time in seven months thanks to the appreciation of local currency’s exchange rate against foreign currencies.

The headline PMI is a number from 0 to 100, such that over 50 shows an expansion of the economy 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 decreased from 48.98 in the sixth month (August 22-Sept. 21) to 43.51 in the seventh month (Sept. 22-Oct. 21), but improved to 46.68 in the eighth month (Oct. 22-Nov. 20).

The “new orders” sub-index dropped from 46.93 in the sixth month to 46.16 in the seventh month to 43.27 in the eight month.

The “supplier deliveries” sub-index, which measures how fast deliveries are made, decreased from 48.50 in the month ending Sept. 21 to 47.90 in the month ending Oct. 21, but rebounded to 52.30 in the month ending Nov. 20.

The “raw materials inventory” sub-index climbed from 35.64 in the month ending Sept. 21 to 36.55 in the month ending Oct. 21 to 39.84 in the month ending Nov. 21.

The PMI reading of “employment” sub-index dropped from 48.46 in the month ending Sept. 21 to 44.51 in the month ending Oct. 21, but improved to 46.11 in the month ending Nov. 20.

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 material purchase prices” sub-index increased from 88.75 in the month ending Sept. 21 to 93.17 in the month leading to Oct. 21, but fell to 83.09 in the month ending Nov. 20.

The “warehouse inventory” sub-index jumped from 43.01 in the month ending Sept. 21 to 46.42 in the month ending Oct. 21 to 50.63 in the month ending Nov. 20.

The “exports” sub-index went up from 41.56 in the sixth fiscal month to 42.49 in the seventh month, but slid to 42.23 in the eighth month.

The “prices of manufactured products or services” sub-index increased from 72.33 in the month ending Sept. 21 to 77.31 in the month ending Oct. 21, but fell to 64.71 in the month ending Nov. 20.

The “fuel consumption” sub-index increased from 53.47 in the month ending Sept. 21 to 53.74 in the month ending Oct. 21 to 57.07 in the month ending Nov. 20.

The “sales” sub-index plunged from 46.20 in the month ending Sept. 21 to 41.85 in the month ending Oct. 21 to 41.22 in the month ending Nov. 20.

The sub-index titled “business output forecasts for the following month” sank from 44.51 in the month ending Sept. 21 to 41.15 in the month ending Oct. 21, but improved to 50.13 in the month ending Nov. 20.

The overall PMI decreased from 46.86 in the month leading to Sept. 21 to 44.47 in the month ending Oct. 21, but grew to 45.70 in the month ending Nov. 20.

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.