The overall Purchasing Managers’ Index, known by its Farsi acronym Shamekh, for Iran's economy settled at 48.41 in the month ending June 20 down from 50.17 in the earlier month, indicating 1.76 points or 3.51% contraction.
A report by the Statistics and Economic Analysis Center of the Iran Chamber of Commerce, Industries, Mines and Agriculture, the sponsor and coordinator of the survey, blamed the rise in raw material prices for the third consecutive month due to the tanking of the rial against foreign currencies as the main factor behind the contraction in the third month of the current fiscal year (May 21-June 20).
The headline PMI is a number from 0 to 100, such that over 50 shows expansion of the economy compared to the previous month. A PMI reading under 50 indicates contraction and a reading of 50 implies no change.
PMI is an index of the prevailing direction of economic trends, aiming to provide information about business conditions to company directors, analysts and purchasing managers.
According to the report, the "business output" sub-index, which had increased from 21.67 in the first month of the current year (March 20-April 19, 2020) to 55.22 in the second month (April 20-May 20), fell back to 51.05 in the third month.
The "new orders" sub-index had increased from 21.45 in the first month of the current year to 51.36 in the second, but dropped to 49.28 in the third.
The rise in the raw material purchase prices for the third consecutive month due to the tanking of the rial against foreign currencies has been blamed for the contraction in economic activities during the third month (May 21-June 20) of the current fiscal year
"Supplier deliveries" sub-index, which measures how fast deliveries are made, increased from 33.49 in the month ending April 19 to 53.19 in the month ending May 20, but fell to 52.07 in the month ending June 20.
"Raw materials inventory" sub-index surged from 25.57 in the month ending April 19 to 37.12 in the month ending May 20 to 40.99 in the month ending June 20.
The PMI reading of "employment" sub-index rose from 46.22 in the first month of the current Iranian year to 46.35 in the second month of the current year but was down to 44.76 last month.
To calculate PMI, seven secondary criteria were also surveyed, 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 70.69 in the month ending April 19 to 89.05 in the month ending May 20 to 91.94 in the month ending June 20.
The "warehouse inventory" sub-index grew from 37.64 in the month ending April 19 to 48.99 in the month ending May 20 but fell to 48.40 in the month leading to June 20.
"Export" sub-index surged from 28.72 in the first month of the current year to 74.43 in the second month but slid to 43.96 in the third fiscal month.
The "prices of manufactured goods and services" sub-index increased from 48.65 in the month ending April 19 to 65.11 next month and to 71.39 in the month ending June 20.
"Fuel consumption" sub-index jumped from 33.83 in the month ending April 19 to 57.52 in the following month and to 57.87 in the month ending June 20.
"Sales" sub-index improved from 17.17 in the month leading to April 19 to 55.50 in the next month, but fell to 47.69 in the month after.
The sub-index entitled as "business output forecasts for the following month" improved from 56.42 in the month ending April 19 to 58.70 in the coming month, but declined to 50.83 in the month after.
The overall PMI improved from 28.68 in the month leading to April 19 to 50.17 in May, indicating 75% improvement, but slumped to 48.41 in the month after.
PMI, among the most precise indicators showcasing a country’s economic health, 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.
