The Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture has measured for the first time the purchasing managers’ index in Iran, under the Farsi acronym Shamekh, for the quarter ending Dec. 21.
The new report shows Iran’s economy is in decline but production expectations were on the rise in the third quarter (Sept. 23-Dec. 21), giving rise to optimistic expectations for the industrial sector in the near future.
PMI is an indicator of economic health for manufacturing and services sectors. The purpose of PMI is to provide information about current business conditions to company decision-makers, analysts and purchasing managers.
ICCIMA drafted the reports by asking questions based on international standards, particularly from those employed by the London-based global information provider, IHS Markit Ltd, as well as executives in charge of the sales or purchases departments of major businesses.
At present, ICCIMA publishes reports only for Iran’s industrial sector and its 12 subset fields. It also plans to survey the services and agriculture sectors in the near future.
PMI is usually deduced by surveying 400 top companies in each sector. At present, says Mohammad Reza Doust-Mohammadi, the head of the statistics center, the center has started engaging with 500 companies, so that if and when some of them drop out and are unable to continue their participation, the survey will be able to go ahead.
The center will continue to report businesses’ PMI by surveying 400 companies, as is the global norm, once the report has found its niche.
Primary Criteria
Raw material inventory levels, employment conditions, new orders’ conditions, supplies and export/production conditions were among the criteria questioned, yielding a final score of between 1 and 100.
If a business scores 50, it means that it has been perceived with no changes compared to the previous month, while scores higher or lower than 50 indicate that the business is booming or stagnating respectively.
PMI is based on a monthly survey sent to senior executives at more than 400 companies. It is based on five major survey areas: new orders with an importance weight of 30%, raw material inventory levels (10%), production (25%), supplies (15%) and employment (20%). The surveys include 12 questions about business conditions and any changes, whether it be improving, no changes or deteriorating.
ICCIMA's Statistics and Economic Analysis Center drafted reports by asking questions based on international standards, particularly from those employed by the London-based global information provider, IHS Markit Ltd, as well as executives in charge of the sales or purchases departments of major businesses
Results published on ICCIMA's website show that PMI has dropped from 41.91 in the Iranian month Mehr (Sept. 23-Oct. 22) to 39.21 in Azar (Nov. 22-Dec. 21); the quarterly average of 40.69 represents a contraction in Iran’s economic activities.
Negative changes in two sub indices of new orders and production were key factors in reducing the Shamekh index in Aban (Oct. 23-Nov. 21) and Azar. This comes as the export index in Q3 shows an upward trend, registering a 1.07% increase for each month. Also, the 1.06% rise in production expectations sub-index in Q3 is indicative of positive expectations for industries market in the not-too-distant future.
Production sub-index has dropped from 44.57 in Mehr (Sept. 23-Oct. 22) to 41.76 in Aban (Oct. 23-Nov. 21) to 37.01 in Azar (Nov. 22-Dec. 21). “Rubber and Plastic Industries”, which had reported improvement for the two consecutive months of Mehr and Aban, was replaced by “non-metallic minerals industries” in Azar. “Downstream oil and gas industries” declined in Azar.
The "new orders" sub-index increased from 39.23% in Mehr to 40.98% in Aban but fell to 32.15% in Azar. “Clothing and leather industries” posted improvement in Azar over the preceding month whereas “textile industries” declined compared to the previous month.
The "supplies" sub-index, which measures how fast deliveries are made, increased from 48.71 in Mehr to 48.98 in Aban to 49.98 in Azar. “Clothing and leather industries” posted an improvement in the supplies sub-index in Azar over the preceding month whereas these industries were ranked worst in Aban. The timetable for supplies of “chemical industries” came worse than the preceding month.
The "raw materials inventory levels" sub-index fell from 35.58 in Mehr to 30.03 in Aban but increased to 35.46 in Azar. “Non-metallic minerals industries” posted month-on-month improvement in Azar, “downstream oil and gas industries” posted no change over Aban, as “chemical industries” deteriorated compared with the previous month.
Employment dropped from 40.68 in Mehr to 39.38 in Aban, but improved to 46.34 in Azar. “Clothing and leather industries” registered better employment in Azar as “automobile and auto parts manufacturing industries” experienced lower employment compared to the preceding month.
Secondary Criteria
To calculate PMI, seven secondary criteria were also surveyed by the center, including raw materials purchase prices, warehouse inventory, exports, prices of products, fuel consumption, sales and production expectations.
The "raw materials purchase prices" sub-index declined from 87.57 in Mehr to 81.77 in Aban and further to 61.83 in Azar.
The "warehouse inventory" sub-index improved from 47.09 in Mehr to 47.28 in Aban and to 55.75 in Azar.
The "exports" sub-index increased from 33.8% in Mehr to 36.62 in Aban and to 39.35 in Azar.
The "prices of products" sub-index decreased from 67.32 in Mehr to 63.49 in Aban to 48.33 in Azar.
The "fuel consumption" sub-index rose from 46.32 in Mehr to 51.69 in Aban but decreased to 47.51 in Azar.
The "sales " sub-index improved from 33.21 in Mehr to 33.98 in Aban but dropped to 30.33 in Azar.
The "production expectations" sub-index improved from 42.79 in Mehr to 43.78 in Aban and to 48.70 in Azar.
PMI, among the most exact indicators showcasing a country’s economic condition, was first devised by the Institute for Supply Management in USA in 1948. It is calculated as (P1 * 1) + (P2 * 0.5) + (P3 * 0) where P1 is a percentage of answers reporting an improvement, P2 is percentage of answers reporting no change and P3 is percentage of answers reporting a deterioration.
