The Purchasing Managers’ Index, known by its Farsi acronym Shamekh, for Iran’s overall economy increased significantly in the current Iranian year’s sixth month (Aug. 23-Sept. 22) compared to the month before to stand above the threshold (50).
The PMI for Iran’s economy settled at 55.55 in the month ending Sept. 22 from 46.59 in the month ending Aug. 22, indicating an 8.96-point or 19.23% growth.
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, says the index shows that the economy is still in expansion mode. However, economic players are concerned about power outages and shortage of raw materials.
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.
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 decreased from 44.93 in the current fiscal year’s fourth month (June 22-July 22) to 40.41 in the fifth month (July 23-Aug. 22) but increased to 57.64 in the sixth month (Aug. 23-Sept. 22).
The “new orders” sub-index increased from 33.98 in the fourth month to 43.89 in the fifth month and grew to 57.43 in the sixth month.
The “supplier deliveries” sub-index, which measures how fast deliveries are made, increased from 49.62 in the month ending July 22 to 54.37 in the month ending Aug. 22 and grew to 54.51 in the month ending Sept. 22.
The “raw materials inventory” sub-index decreased from 47.81 in the month ending July 22 to 47.16 in the month ending Aug. 22, but increased to 52.03 in the month ending Sept. 22.
The PMI reading of “employment” sub-index declined from 54.87 in the month ending July 22 to 52.23 in the month ending Aug. 22, but increased to 52.65 in the month ending Sept. 22.
To calculate PMI, seven secondary criteria were also 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 declined from 84.02 in the fourth month of the current fiscal year to 80.75 in the month ending Aug. 22 and declined to 80.13 in the month ending Sept. 22.
The “warehouse inventory” sub-index expanded from 48.36 in the month ending July 22 to 50.15 in the month ending Aug. 22, but shrank to 50.09 in the month ending Sept. 22.
The “exports” sub-index increased from 42.09 in the fourth month to 45.11 in the fifth month and grew to 48.74 in the sixth month.
The “prices of manufactured products or services” sub-index increased from 58.18 in the month ending July 22 to 59.03 in the month ending Aug. 22 and grew to 62.52 in the month ending Sept. 22.
The “fuel consumption” sub-index declined from 56.57 in the month ending July 22 to 45.94 in the month ending Aug. 22, but increased to 50.22 in the month ending Sept. 22.
The “sales” sub-index declined from 42.67 in the month ending July 22 to 40.01 in the month ending Aug. 22, but grew to 57.64 in the month ending Sept. 22.
The sub-index entitled “business output forecasts for the following month” increased from 57.01 in the month ending July 22 to 64.34 in the month ending Aug. 22, but declined to 63.32 in the month ending Sept. 22.
The overall PMI increased from 44.62 in the month ending July 22 to to 55.55 in the month ending Sept. 22.
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.
Foreign Growth Forecasts
The World Bank has revised up its estimates and forecasts about Iran’s economic growth.
In a new report titled “Overconfident: How Economic and Health Fault Lines Left the Middle East and North Africa Ill-Prepared to Face Covid-19,” the bank has put its 2021 expectation for Iran’s GDP growth at 3.1%, which is 1% more than its previous forecast.
The revised-up 2022 forecast is now at 2.4% - 0.2% more than previously expected.
According to the report’s MENA economic update for October, the Iranian economy grew by 3.4% in 2020. Previously, the World Bank said it grew by 1.7%.
Iran’s economy experienced a 6% and 6.8% contraction in 2018 and 2019 respectively, the bank says.
Real GDP per capita growth is forecast to hit 1.8% and 1.2% in 2021 and 2022 after having experienced a 2.1% expansion in 2020 and an 8% contraction in 2019, the report shows.
This is the second time the World Bank is revising its estimates and forecasts about Iran’s economy. The first time was back in June.
This is while the International Monetary Fund expects Iran’s economy to grow by 2.5% in 2021.
In its World Economic Outlook report titled “Managing Divergent Recoveries”, the IMF has put Iran’s GDP growth in 2020 at 1.5% and 2.1% for 2022.
According to IMF, the country experienced a 13.4% growth in 2016, the year Iran’s nuclear deal with world powers, formally known as Joint Comprehensive Plan of Action, was implemented and international sanctions against the Islamic Republic were lifted.
The massive growth was followed by a further 3.8% in 2017. But with the withdrawal of the US from JCPOA in 2018 and the introduction of new rounds of sanctions, the Iranian economy respectively shrank by 6% and 6.8% in the following two years.
Besides the pandemic, Iran’s economy has been grappling with the US maximum pressure campaign, although the new government led by Joe Biden is looking to revive JCPOA.
The revival talks have been stalled as the government in Iran changed, following the election of Ebrahim Raeisi as the new president.
Domestic Growth Estimates
The Statistical Center of Iran says the economy registered a 7.6% year-on-year growth in the first quarter of the current fiscal year that started on March 21.
The industries and mines, and services grew by 13.8% and 4.5% respectively, but agriculture contracted by 4.5%, according to a new report posted on the SCI website.
The center noted that GDP growth, excluding the oil sector, stood at 4.6% in the first quarter (spring).
The SCI report came shortly after the Central Bank of Iran reported that the Iranian economy grew by 6.2% in Q1.
According to a new report published on the bank’s website, except for the drought-hit agriculture with -0.9%, all economic sectors showed growth during the period: oil with 23.3%, industries and mines with 2.1% and services with 7%.
Noting that the service sector has shown distinct signs of recovery after having been hit hard by Covid-19 pandemic in the first quarter of last year (registering a 2.5% contraction), the report attributes the expansion mainly to the subsectors of “transportation and warehousing”, “health and social work”, “wholesale, retail and auto repair”, “information and communications” and “professional, scientific and vocational”.
The report added that growth, excluding the oil sector, stood at 4.7% in Q1.
According to CBI, the economy also expanded in the fiscal 2020-21.
Iran’s gross domestic product in the last fiscal year (March 2020-21) registered 3.6% growth, according to an earlier report.
Economic growth, excluding oil, expanded by 2.5%.
According to SCI, last fiscal year’s GDP expanded by 0.7% compared with the year before.
Economic growth, excluding oil, saw an economic growth of near zero, SCI reported.
The center’s sectoral breakdown of growth rates shows that the agriculture, and industries and mines sectors experienced a respective growth of 3.5% and 4.2% during the period. The services sector contracted by 2% in the fiscal 2020-21.
