Iran Chamber of Commerce to Publish First-Ever PMI Report

EghtesadOnline: The Iran Chamber of Commerce, Industries, Mines and Agriculture is to soon publish a purchasing managers index (PMI) report to provide more transparent information about business conditions in Iran.

News ID: ۷۸۴۱۸۷

14 October 2018

The report, which will be published at regular intervals, is a first of its kind in the country.

ICCIMA has announced on its official news website that it will publish its monthly PMI report under the Farsi acronym "Shamekh".

The norm is to publish the report on the first working day of each Iranian month and the chamber aims to stay loyal to that norm, but will disclose the first report with a few days’ delay on Nov. 1, which marks the 10th day of the eighth Iranian month, Aban, according to Financial Tribune.

PMI is an indicator of economic health for manufacturing and services sectors. The purpose of PMI is to provide information about current business conditions to corporate decision-makers, analysts and purchasing managers.

> Filling in Previous Information Gaps

ICCIMA already conducts periodic surveys on Iran’s doing business climate, the eighth edition of which will be published in the coming days.

The survey delineates most important challenges of doing business as perceived by business owners and operators, but the private sector saw information gaps on the actual conditions of businesses and is therefore publishing PMI reports.

According to the latest such survey, Iran’s National Business Environment Index came in lower in the first quarter of the current fiscal year (March 21-June 21) compared with the previous quarter, according to a study by Statistical Center of Iran.

The index stood at 6.15 points this spring, down from last year's Q4 (Dec. 22, 2017-March 20, 2018) score of 5.80.

NBEI measures business friendliness of Iran’s economy, with 10 indicating the worst grade. The lower the figure, the better the business environment.

Unpredictability of raw material price fluctuations, bank financing difficulties and inconsistent policymaking were the main adverse factors affecting Iran's business environment during the period under review, according to the study's findings.

The chamber also measures the index for each of the 31 Iranian provinces. The report named North Khorasan, Sistan-Baluchestan and Khuzestan as the provinces with the worst environment to do business in, while Gilan, Fars and Zanjan provinces were considered the best in this regard.

As for different fields of business, the top three were “real estate”, "information and communications" and “water supply, wastewater management and water treatment”. The bottom tier includes "services and support administration”, “construction” and “food”.

> A Scope for Forecasting

“So calculating and publishing PMI, which outlines conditions of businesses compared to the previous month and can provide a forecast of conditions in the coming months, has been put on the agenda of the Statistics and Economic Analysis Center of ICCIMA,” Mohammad Reza Doost-Mohammadi, the head of statistics center, said.

The official noted that the center has started drafting the reports by asking questions based on international standards from executives in charge of the sales or purchases department of major businesses.

Inventory levels, employment conditions, new orders’ conditions, supplier deliveries, and export/production conditions are among criteria that are subject to questions, yielding a final score of between 1 and 100.

If a business scores 50, it means that it has been perceived with no changes compared to the previous months, while scores higher or lower than 50 indicate that the business is booming or stagnating respectively.

ICCIMA will start publishing the reports only for Iran’s industrial sector and its 12 subset areas at the beginning. It plans to expand its work to survey the services and agriculture sectors in the near future.

PMI is usually compiled after surveying 400 top companies in each sector. At present, said Doost-Mohammadi, the statistics center of ICCIMA has started engaging with 500 companies, so that if and when some of them drop out and are unable to continue their participation, the survey will be able to go ahead.

The center will continue to report businesses’ PMI by surveying 400 companies, as is the global norm, once the report has found its niche.

> Encouraging Firms to Cooperate

“In devising the data for the Shamekh index, the willingness of companies to cooperate has been considered the main principle to minimize incorrect or unreal comments,” the head of the statistics center said.

“However, an expert team will further analyze the data in comparison with the evidence visible at the macroeconomic level. For instance, the companies' profile is registered in the capital market to ensure the report is published with the most realistic numbers."

The company-specific details of the report will remain confidential with ICCIMA, as the final report will only outline general conditions of an economic sector or industry.

To incentivize companies to participate, ICCIMA will refer to them as partner companies and introduce them as credible firms to help with their branding. It is conducting negotiations with its affiliate, the National Ranking Center, to consider benefits for participating companies.

The website of Shamekh index has been uploaded on the domain of the chamber and will become operational from Oct. 17. Company executives will be able to log in and answer questions related to the index.

PMI, among the most precise indicators of a country’s economic condition, was first devised by the Institute for Supply Management in the US in 1948. It is calculated as (P1 * 1) + (P2 * 0.5) + (P3 * 0) where P1 is percentage of answers reporting an improvement, P2 is percentage of answers reporting no change and P3 is percentage of answers reporting a deterioration.