Industrial PMI About to Cross Over Threshold

EghtesadOnline: The Purchasing Managers’ Index for industries during the 10th month of the current fiscal year (Dec. 21, 2020-Jan. 19) settled at 49.79 from 49.30 in the preceding month (Nov. 21-Dec. 20, 2020), indicating a 0.49-point or a 0.99% increase.

News ID: ۷۸۵۹۶۳

09 February 2021

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 28 months.

Five Main Sub-Indices

The “production” sub-index for Iran’s industrial sector increased from 47.94 in the eighth Iranian month (Oct. 22-Nov. 20, 2020) to 50.75 in the ninth month (Nov. 21-Dec. 20, 2020). but fell to 48.65 in the 10th month (Dec. 21, 2020-Jan. 19).

“Vehicle and spare parts industries” recorded the highest PMI of the production sub-index with a reading of 63.33 while non-metal minerals registered the lowest PMI with a reading of 34.62.

The “new orders” sub-index slid from 44.02 in the month ending Nov. 20 to 43.51 in the month ending Dec. 20, but jumped to 44.80 in the month ending Jan. 19, with the top performing industries being “rubber and plastic” (72.22) and worst being “non-metal minerals” (26.92).

The “supplier deliveries” sub-index, which measures how fast deliveries are made, improved from 55.32 in the month ending Nov. 20 to 56.43 in the month ending Dec. 20 to 58.49 in the month ending Jan. 19.

The highest supplier deliveries PMI was posted by “textile industries” and “vehicle and spare parts” with a reading of 66.67 and the lowest was recorded by “rubber and plastic industries” and “non-metal minerals” with a reading of 50.

The “raw material inventory” sub-index grew from 42.49 in the month ending Nov. 20 to 48.92 in the month ending Dec. 20, but fell to 46.29 in the month ending Jan. 19.

“Non-metal minerals” posted the highest PMI (69.23) for the “raw material inventory” sub-index while “food industries” registered the lowest PMI reading of 29.03 among all groups.

The PMI reading of “employment” sub-index stood above the threshold. It increased from 49.43 in the month ending Nov. 20 to 51 in the month ending Dec. 20 to 53.94 in the month ending Jan. 19.

“Clothing and leather industries” posted the highest employment PMI reading (61.54) whereas “wood, paper and furniture” posted the lowest PMI for the sub-index (46.88).

Economic Health Indicator

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, showing no changes or deteriorating.

Industries categorized as “others” posted the highest PMI with a reading of 58.93 while “non-metal mineral industries” registered the lowest PMI reading of 41.92.

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 79.90 in the month ending Nov. 20 to 79.96 in the month ending Dec. 20, but fell to 73.72 in the month ending Jan. 19.

All 12 groups registered PMI readings of higher than 50 for “raw material purchase price” sub-index in the 10th fiscal month: The highest PMI was recorded for “textile industries” with a reading of 94.44 and the lowest for “metal industries” with 59.82.

The “warehouse inventory” sub-index improved from 55.60 in the month ending Nov. 20 to 57.17 in the month ending Dec. 20, but dropped to 52.92 in the month ending Jan. 19.

The highest PMI reading for “warehouse inventory” sub-index was registered for “clothing and leather industries” with 65.38 and the lowest PMI reading was recorded for “petroleum and gas products” with 38.89.

The “exports” sub-index climbed from 45.50 in the month ending Nov. 20 to 48.29 in the month ending Dec. 20, but slid to 45.14 in the month ending Jan. 19.

PMI reading of “exports” sub-index was the highest for “chemicals” (53.92) and lowest for “non-metal minerals” (34.62).

The “prices of manufactured products” sub-index decreased from 62.12 in the month leading to Nov. 20 to 56.62 in the month ending Dec. 20 to 50.86 in the month closing on Jan. 19.

“Textile industries” recorded the highest PMI of 61.11 for the “prices of manufactured products” sub-index during the ninth month of the Iranian year while “machinery and home appliances industries” posted the lowest PMI reading of 37.50.

The “fuel consumption” sub-index increased from 56.59 in the month leading to Nov. 20 to 58.39 in the month ending Dec. 20, but decreased to 54.11 in the month ending Jan. 19.

Industries categorized as “others” registered the highest PMI measured for “fuel consumption” (85.71) while “petroleum and gas products industries” registered the lowest (39.13).

The “sales” sub-index improved from 43.03 in the month ending Nov. 20 to 44.24 in the month ending Dec. 20, but dropped to 43.78 in the month ending Jan. 19.

“Vehicles and spare parts industries” posted the highest sales PMI with a reading of 61.67 while “non-metal mineral industries” registered the lowest PMI with a reading of 26.92.

The sub-index called “production forecasts for the following month” surged from 51.59 in the month ending Nov. 20 to 58.22 in the month leading to Dec. 20 to 64.74 in the month closing on Jan. 19.

Ten 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 81.25 and food industries the lowest PMI reading of 46.77.

The overall PMI for industries increased from 47.63 in the month ending Nov. 20 to 49.30 in the month leading to Dec. 20 to 49.79 in the month closing on Jan. 19.

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.