Iran's Industrial PMI Ends Fiscal 2020-21 Above Threshold

EghtesadOnline: The Purchasing Managers’ Index for industries during the 12th month of last fiscal year (Feb. 19-March 20) settled at 57.29 from 58.34 in the preceding month (Jan. 20-Feb. 18), indicating a 1.05-point or a 1.8% decrease.

News ID: ۷۸۶۳۵۶

17 April 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 30 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 ranging 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.

“Rubber and plastics” industries posted the highest PMI with a reading of 62.92 while “non-metal mineral industries” registered the lowest PMI reading with 51.25.

Five Main Sub-Indices

The “production” sub-index for Iran’s industrial sector increased from 48.65 in the 10th month (Dec. 21, 2020-Jan. 19) to 59.58 in the 11th month (Jan. 20-Feb. 18) but fell to 56.15 in the 12th month (Feb. 19-March 20.)

Industries categorized as “others” recorded the highest PMI of the production sub-index with a reading of 66.67 while textile industries registered the lowest PMI with a reading of 33.33.

The “new orders” sub-index jumped from 44.80 in the month ending Jan. 19 to 60.03 in the month ending Feb. 18 to 62.18 in the month ending March 20, with the top performing industries being “wood, paper and furniture” (71.88) and worst being two groups of “clothing and leather” and “industries categorized as others” with 50.

The “supplier deliveries” sub-index, which measures how fast deliveries are made, improved from 58.49 in the month ending Jan. 19 to 63.79 in the month leading to Feb. 18, but slid to 63.70 in the month ending March 20.

The highest supplier deliveries PMI was posted by industries classified as “others” with a reading of 83.33 and the lowest was recorded for “non-metal mineral industries” with a reading of 55.

The “raw material inventory” sub-index rose from 46.29 in the month ending Jan. 19 to 50.93 in the month ending Feb. 18, but fell to 49.42 in the month ending March 20.

“Wood, paper and furniture” posted the highest PMI (65.63) for the “raw material inventory” sub-index while “clothing and leather industries” registered the lowest PMI reading of 28.57 among all groups.

The PMI reading of “employment” sub-index decreased from 53.94 in the month ending Jan. 19 to 53.89 in the month ending Feb. 18 to 50.48 in the month ending March 20.

“Rubber and plastics industries” posted the highest “employment” PMI reading (66.67) whereas “clothing and leather” posted the lowest PMI of the sub-index (42.86).

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 jumped from 73.72 in the month ending Jan. 19 to 75.57 in the month ending Feb. 18 to 79.98 in the month ending March 20.

All 12 groups registered PMI readings of higher than 50 for “raw material purchase price” sub-index in the 12th fiscal month: The highest PMI was recorded for industries categorized as “others” with a reading of 100 and the lowest for “machinery and home appliances” with 74.

The “warehouse inventory” sub-index improved from 52.92 in the month ending Jan. 19 to 53.18 in the month ending Feb. 18, but dropped to 44.66 in the month ending March 20.

The highest PMI reading for “warehouse inventory” sub-index was registered for industries classified as “others” with 83.33 and the lowest PMI reading was recorded for “rubber and plastics” with 33.33.

The “exports” sub-index climbed from 45.14 in the month ending Jan. 19 to 50.48 in the month leading to Feb. 18 to 52.66 in the month ending March 20.

PMI reading of “exports” sub-index was the highest for “textile industries” (58.33) and the lowest for “rubber and plastics” (33.33).

The “prices of manufactured products” sub-index increased from 50.86 in the month ending Jan. 19 to 55.87 in the month ending Feb. 18 to 56.45 in the month ending March 20.

“Petroleum and gas products” recorded the highest PMI of 79.17 for the “prices of manufactured products” sub-index during the 12th month of the Iranian year while “machinery and home appliances” posted the lowest PMI reading of 48.

The “fuel consumption” sub-index increased from 54.11 in the month ending Jan. 19 to 58.25 in the month ending Feb. 18, but dropped to 57.32 in the month ending March 20.

Industries categorized as “others” registered the highest PMI measured for “fuel consumption” (83.33) while “textile industries” registered the lowest (41.67).

The “sales” sub-index improved from 43.78 in the month ending Jan. 19 to 57.12 in the month ending Feb. 18 to 64.18 in the month ending March 20.

“Textile industries” posted the highest sales PMI with a reading of 75 while “food industries” registered the lowest PMI with a reading of 58.33.

The sub-index called “production forecasts for the following month” rose from 64.74 in the month leading to Jan. 19 to 67.01 in the month ending Feb. 18, but sank to 44.22 in the month ending March 20.

Only three groups reported PMI reading above 50 for “production forecasts for the following month” sub-index with “textile industries” registering the highest PMI reading of 75 and industries categorized as “others” the lowest PMI reading of 33.33.

The overall PMI for industries increased from 49.79 in the month ending Jan. 19 to 58.34 in the month ending Feb. 18, but fell to 57.29 in the month ending March 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.