The Purchasing Managers' Index for Iran’s economy has emerged from a record low registered in the 10th month of the current Iranian year (Dec. 22, 2022-Jan. 20), new data released by the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture show.
According to the data, after registering a significant boost, PMI settled at 51.35 in the 11th month of the year (Jan. 21-Feb. 19) from 41.89 registered in the previous month, indicating a 9.46-point or 22.58% increase.
PMI indicates the prevailing direction of economic trends in the manufacturing and services sectors. The headline PMI is a number from 0 to 100, such that over 50 indicates an economic expansion compared with the previous month. A PMI reading under 50 indicates contraction and a reading of 50 implies no change.
The index is indicative of the prevailing direction of a country’s economic trends, aiming to provide information about business conditions to company directors, analysts and purchasing managers.
The previous PMI report suggested a “massive crash” in the index, attributing the downturn in economic performance to long-standing factors plaguing the Iranian economy, such as runaway inflation, plummeting value of the national currency and ever-dwindling market demand, in addition to a new challenge: energy shortage.
Iran’s PMI settled at 41.89 in the 10th month of the year from 49.14 registered in the previous month, indicating a 7.25-point or 14.75% decrease.
Describing the huge fall in the index as indication of a ‘rare’ slump in Iran’s economy, the report said: “Except for the first month of every Iranian year [which coincides with the Iranian New Year holidays which, in turn, sees a marked decline in economic activities], and the last month of the Iranian year 1398 [Feb.-March 2020] which saw the outbreak of Covid-19, this is the lowest PMI recorded ever since the project [i.e. PMI reports] began.”
According to the new report, the 11th month of the Iranian year usually sees a boost in PMI indices. However, the new data continue to indicate the adverse effects of the sharp decline in the value of national currency and the shortage of manufacturing inputs, raw materials, equipment and inventories.
“Severe instability in prices and inflationary expectations in the upcoming months will lead to confusion both on the demand and supply side regarding [companies’] purchases and planning,” reads the new report.
Main PMI Indexes
The ICCIMA survey has five main indices to calculate the overall PMI.
According to the report, the “activity level” index decreased from 50.51 in the ninth month of the year (Nov. 22-Dec. 21) to 39.48 in the 10th month (Dec. 22, 2022-Jan. 20), but increased to 53.45 in the 11th month (Jan. 21-Feb. 19).
The “new orders” index decreased from 48.47 in the ninth month to 40.82 in the 10th month, but grew to 49.6 in the 11th month.
The “supplier deliveries” index, which measures how fast deliveries are made, decreased from 49.75 in the month to Dec. 21 to 43.35 in the month ending Jan. 20, but increased to 57.72 in the month ending Feb. 19.
The “raw materials inventory” index declined from 46.41 in the month ending Dec. 21 to 39.54 in the month ending Jan. 20, but grew to 42.2 in the month ending Feb. 19.
The PMI reading of “employment” index decreased from 49.32 in the ninth month to 46.62 in 10th month, but increased to 51.14 in the 11th month.
Sub-Indices
To calculate PMI, seven secondary criteria are surveyed by the center, namely “raw material purchase prices”, “warehouse inventory”, “exports”, “product price”, “fuel consumption”, “sales” and “production expectations”.
The “raw material purchase prices” sub-index increased from 85.25 in the month ending Dec. 21 to 85.26 in the month ending Jan. 20 and 86.49 in the month ending Feb. 19.
The “warehouse inventory” sub-index decreased from 50.49 in the ninth month to 46.58 in the 10th month, but grew to 47.93 in the 11th month.
The “exports” sub-index declined from 50.84 in the ninth month to 45.74 in the 10th month and to 44.54 in the 11th month.
The “prices of manufactured products or services” sub-index grew from 58.58 in the month to Dec. 21 to 59.61 in the month to Jan. 20 and to 61.84 in the month ending Feb. 19.
The “fuel consumption” sub-index decreased from 67.25 in the month ending Dec. 21 to 59.09 in the month ending Jan. 20, but increased to 59.62 in the month ending Feb. 19.
The “sales” sub-index declined from 48.15 in the ninth month to 43.31 in the 10th month, but grew to 57.21 in the 11th month.
The sub-index of “business output forecasts for the following month” decreased from 55.01 in the month ending Dec. 21 to 52.7 in the month ending Jan. 20, but grew to 55.97 in the month ending Feb. 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.
