PMI for Industries Drops Below Threshold

EghtesadOnline: The Purchasing Managers’ Index for industries in the eighth month of the current fiscal year (Oct. 22-Nov. 20), settled at 47.63 from 52.22 in the preceding month (Sept. 22-Oct. 21), indicating a 4.59-point or an 8.79% decrease.

News ID: ۷۵۱۶۸۳

10 December 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 26 months.

PMI is an indicator of economic health for manufacturing and services sectors. It provides information about current business conditions to company officials, 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.

Industries categorized as “others” posted the highest PMI with a reading of 58 in the month while “clothing and leather” registered the lowest PMI reading with 41.6.

Five Main Sub-Indices

The “production” sub-index for Iran’s industrial sector decreased from 56.17 in the sixth month (August 22-Sept. 21) to 52.16 in the seventh month (Sept. 22-Oct. 21) to 47.94 in the eighth month (Oct. 22-Nov. 20).

Industries classified as “others” recorded the highest PMI of the production sub-index (70) while food industries registered the lowest PMI with a reading of 40.3.

The “new orders” sub-index declined from 57.48 in the month ending Sept. 21 to 55.42 in the month ending Oct. 21 to 44.02 in the month ending Nov. 20, with the top performing industries being “rubber and plastic” (64.3) and worst being “clothing and leather” (31.8%).

The “supplier deliveries” sub-index, which measures how fast deliveries are made, slid from 56.72 in the month ending Sept. 21 to 54.66 in the month ending Sept. 21, but improved to 55.32 in the month ending Nov. 20.

The highest supplier deliveries PMI was posted by industries categorized as “others” with a reading of 70 and the lowest was recorded for “wood, paper and furniture industries” with a reading of 43.3.

The “raw material inventory” sub-index slid from 41.01 in the month ending Sept. 21 to 37.46 in the month ending Oct. 21, but rebounded to 42.49 in the month ending Nov. 20.

“Wood, paper and furniture industries” posted the highest PMI (53.3) while industries classified as “others” registered the lowest PMI reading of 20 among all groups.

The PMI reading of “employment” sub-index fell below the threshold. It decreased from 53.17 in the month ending Sept. 21 to 53.08 in the month ending Oct. 21 to 49.43 in the month ending Nov. 20.

Industries categorized as “others” posted the highest employment PMI reading (80) whereas “wood, paper and furniture industries” and “non-metallic mineral industries” posted the lowest PMI of the sub-index (44.4).

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 93.08 in the month ending Sept. 21 to 94.82 in the month ending Oct. 21, but dropped to 79.90 in the month ending Nov. 20.

All 12 groups registered PMI readings of higher than 50 for “raw material purchase price” sub-index in the seventh fiscal month: The highest PMI was recorded for industries categorized as “others” with a reading of 100 and the lowest for “metal industries” with 68.4.

The “warehouse inventory” sub-index shrank from 49.13 in the month leading to Sept. 21 to 45.20 in the month leading to Oct. 21, but expanded to 55.60 in the month ending Nov. 20.

The highest PMI reading for “warehouse inventory” sub-index was registered for “metal industries” with 65.3 and the lowest PMI reading was recorded for “clothing and leather” with 31.8.

The “exports” sub-index fell from 47.44 in the month ending Sept. 21 to 47.03 in the month ending Oct. 21 to 45.50 in the month ending Nov. 20.

PMI reading of “exports” sub-index was the highest for industries categorized as “others” and “wood, paper and furniture industries” (50) and the lowest for “petroleum and gas products” (38.6).

The “prices of manufactured products” sub-index increased from 70.80 in the month ending Sept. 21 to 74.81 in the month ending Oct. 21, but plunged to 62.12 in the month leading to Nov. 20.

“Petroleum and gas products industries” recorded the highest PMI of 75 for the prices of “manufactured products” sub-index during the eighth month of the Iranian year while “textile industries” posted the lowest PMI of 45.

The “fuel consumption” sub-index climbed from 53.79 in the month ending Sept. 21 to 56.69 in the month ending Oct. 21, but slid to 56.59 in the month leading to Nov. 20.

Industries categorized as “others” registered the highest PMI measured for “fuel consumption” (80) while “textile industries” registered the lowest (40).

The “sales” sub-index plummeted from 55.38 in the month ending Sept. 21 to 49.98 in the month ending Oct. 21 to 43.03 in the month ending Nov. 20.

“Rubber and plastic industries” posted the highest sales PMI with a reading of 57.1 while “clothing and leather industries” registered the lowest PMI with a reading of 31.8.

The “production forecasts for the following month” sub-index improved from 52.28 in the month ending Sept. 21 to 57.36 in the month ending Oct. 21, but dropped to 51.59 in the month ending Nov. 20.

Seven groups reported PMI reading above 50 for “production forecasts for the following month” sub-index with “non-metallic mineral industries” registering the highest PMI reading of 72.2 and “clothing and leather” the lowest PMI of 31.8.

The overall PMI for industries decreased from 54.53 in the month leading to Sept. 21 to 52.22 in the month ending Oct. 21 to 47.63 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.