Construction Growth at 7% in H1

EghtesadOnline: The construction sector grew by 7% in the first half of the current fiscal year (March 21-Sept. 22) compared with last year’s corresponding period, latest data released by the Statistical Center of Iran show.

News ID: ۷۸۷۴۳۹

15 December 2021

SCI had put the sector’s growth in the fiscal 2020-21 at 6.3%.

The sector’s GDP stood at 163.179 trillion rials ($543.9 at the exchange rate of 300,000 rials per dollar) in H1 to account for 4.5% of total gross domestic product during the period.

A report by Research and Markets expects Iran’s construction output to expand by 1.8% in 2021, before registering an annual average growth of 3.3% between 2022 and 2025.

The report says the sector expanded marginally by 0.7% in 2020, down from a growth of 8% in 2019.

This will be supported by investments in the energy, oil and gas, petrochemicals, infrastructure and industrial sectors. In an effort to boost the economy and improve infrastructure, the Iranian government aims to complete over 3,900 km of new railroads and roads by March 2022.

The outbreak of the coronavirus pandemic, coupled with the steep decline in oil and gas prices, has weighed on the Iranian economy, which was already battered by the US sanctions that curb oil and gas exports, which are crucial for government revenues. The economic weakness amid the Covid-19 pandemic and the US sanctions, coupled with the depreciation of the currency and rising inflation, further weighed on the construction industry's output last year.

A new report by Iran Chamber of Cooperatives shows the monthly Purchasing Managers’ Index for the domestic construction sector has declined to stand below the 50-mark.

PMI in the eighth month of the current Iranian year (Oct. 23-Nov. 21) settled at 42.8 from 56.92 in the preceding month (Sept. 23-Oct 22), indicating a 24.81% decrease.

PMI is an indicator of the health of economic sectors and provides information about current business conditions to decision-makers, analysts and purchasing managers.

Raw material inventory, employment conditions, new orders, supplier deliveries and export/production conditions were among the criteria quizzed, yielding a final score of between 1 and 100.

If a business scores 50, it means that no change has been perceived compared to the previous month, while scores higher or lower than 50 indicate that the business is booming or deteriorating respectively.

The survey includes 12 questions about business conditions and any changes, whether it be improving, no changes or deteriorating.

It is measured through a monthly survey sent to senior executives of 100 companies active in the real-estate sector. It is based on five major survey areas: "new orders" with a coefficient of 30%, "raw material inventory" (10%), "production" (25%), "supplier deliveries" (15%) and "employment" (20%).

The "new orders" sub-index stood at 40.07 in the month ending Nov. 21, indicating a 27.65% decrease compared with 55.39 of the month ending Oct. 22.

The "supplier deliveries" sub-index, which measures how fast deliveries are made, decreased by 7.75% from 53.45 in the month ending Oct. 22 to 49.31 in the month ending Nov. 21.

The "raw materials (construction materials) inventory" sub-index declined by 8.39% from 46.36 in the month ending Oct. 22 to 42.47 in the month leading to Nov. 21.

The "employment" sub-index decreased by 11.63% from 50.38 in the month ending Oct. 22 to 44.52 in the month ending Nov. 21.

To calculate housing PMI, seven secondary criteria were also surveyed by ICC, including "raw material purchase prices", which stood at 72.69 in the month ending Oct. 22. The sub-index declined by 5.78% to stand at 68.49 in the month ending Nov. 21.

"Warehouse inventory" decreased by 6.81% to reach 46.23 in the eighth Iranian month from 49.61 in the seventh month.

The "exports" sub-index settled at 47.26 in the month ending Nov. 21 from 48.07 in the month ending Oct. 22, registering a 1.69% decrease.

"Prices of products or services" increased by 4.17% to stand at 63.7 in the month ending Nov. 21 from 61.15 in the previous month.

"Fuel consumption" decreased by 0.22% from 51.14 in the seventh Iranian month to 51.03 in the eighth month.

"Sales" declined by 22.57% from 53.07 in the seventh month to 41.09 in the eighth month.

And, "performance expectations for the following month" sub-index settled at 39.38 in the month ending Nov. 21 from 45.38 in the month before, showing a 13.22% decline.