Industrial PMI at 8-Month High

EghtesadOnline: Anew report by the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture shows the Purchasing Managers’ Index for Iranian industries hit an eight-month high in the 11th month of the current fiscal year (Jan. 20-Feb. 18).

News ID: ۷۸۶۲۰۹

08 March 2021

According to the report, the index settled at 58.34 from 49.79 in the preceding month (Dec. 21, 2020-Jan. 19), indicating an 8.55-point or a 17.17% increase.

The Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture has been measuring PMI, known by its Farsi acronym Shamekh, in Iran for the past 29 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 change or deteriorating.

Wood, paper and furniture industries posted the highest PMI with a reading of 67.03 while industries categorized as “others” registered the lowest PMI reading with 43.

Five Main Sub-Indices

The “production” sub-index for Iran’s industrial sector decreased from 50.75 in the ninth month (Nov. 21-Dec. 20, 2020) to 48.65 in the 10th month (Dec. 21, 2020-Jan. 19) but jumped to 59.58 in the 11th month (Jan. 20-Feb. 18).

Wood, paper and furniture industries recorded the highest PMI of the “production” sub-index with a reading of 71.88 while industries classified as “others” registered the lowest PMI with a reading of 30.

The “new orders” sub-index improved from 43.51 in the month ending Dec. 20 to 44.80 in the month ending Jan. 19 to 60.03 in the month ending Feb. 18, with the top performing industries being wood, paper and furniture (71.88) and worst being rubber and plastics (40).

The “supplier deliveries” sub-index, which measures how fast deliveries are made, improved from 56.43 in the month ending Dec. 20 to 58.49 in the month ending Jan. 19 to 63.79 in the month leading to Feb. 18.

The highest “supplier deliveries” PMI was posted by clothing and leather industries with a reading of 83.33 and the lowest was recorded for rubber and plastic industries and industries categorized as “others” with a reading of 50.

The “raw material inventory” sub-index fell from 48.92 in the month ending Dec. 20 to 46.29 in the month ending Jan. 19, but jumped to 50.93 in the month ending Feb. 18.

Non-metal minerals posted the highest PMI (68.18) for the “raw material inventory” sub-index while industries classified as “others” registered the lowest PMI reading of 30 among all groups.

The PMI reading of “employment” sub-index stood above the threshold last month. It increased from 51 in the month ending Dec. 20 to 53.94 in the month ending Jan. 19, but dropped to 53.89 in the month ending Feb. 18.

Textile industries posted the highest “employment” PMI reading (68.75) whereas food industries posted the lowest PMI of the sub-index (46.05).

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 decreased from 79.96 in the month ending Dec. 20 to 73.72 in the month ending Jan. 19, but rebounded to 75.57 in the month ending Feb. 18.

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 petroleum and gas products industries with a reading of 86.96 and the lowest for industries categorized as “others” with 60.

The “warehouse inventory” sub-index fell from 57.17 in the month ending Dec. 20 to 52.92 in the month ending Jan. 19, but climbed to 53.18 in the month ending Feb. 18.

The highest PMI reading for “warehouse inventory” sub-index was registered for non-metal minerals industries with 72.73 and the lowest PMI reading was recorded for metal industries with 45.08.

The “exports” sub-index slid from 48.29 in the month ending Dec. 20 to 45.14 in the month ending Jan. 19, but rebounded to 50.48 in the month leading to Feb. 18.

PMI reading of “exports” sub-index was the highest for rubber and plastics (60) and the lowest for machinery and home appliances (40.32).

The “prices of manufactured products” sub-index decreased from 56.62 in the month ending Dec. 20 to 50.86 in the month ending Jan. 19 but increased to 55.87 in the month ending Feb. 18.

Petroleum and gas products recorded the highest PMI of 76.09 for the “prices of manufactured products” sub-index during the 11th month of the Iranian year while industries categorized as “others” posted the lowest PMI reading of 40.

The “fuel consumption” sub-index decreased from 58.39 in the month ending Dec. 20 to 54.11 in the month ending Jan. 19, but increased to 58.25 in the month ending Feb. 18.

Wood, paper and furniture registered the highest PMI measured for “fuel consumption” (65.63) while rubber and plastics registered the lowest (50).

The “sales” sub-index slid from 44.24 in the month ending Dec. 20 to 43.78 in the month ending Jan. 19 but improved to 57.12 in the month ending Feb. 18.

Wood, paper and furniture posted the highest “sales” PMI with a reading of 71.88 while industries categorized as “others” registered the lowest PMI with a reading of 30.

The sub-index called “production forecasts for the following month” surged from 58.22 in the month ending Dec. 20 to 64.74 in the month leading to Jan. 19 to 67.01 in the month ending Feb. 18.

Ten groups reported PMI reading above 50 for “production forecasts for the following month” sub-index with non-metal minerals registering the highest PMI reading of 86.36 and clothing and leather the lowest PMI reading of 37.50.

The overall PMI for industries increased from 49.30 in the month ending Dec. 20 to 49.79 in the month ending Jan. 19 to 58.34 in the month ending Feb. 18.

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.