New data released on Purchasing Managers’ Index for Iran’s overall economy show a persisting downtrend for the fourth consecutive month.
The PMI, known by its Farsi acronym Shamekh, for Iran’s overall economy settled at 46.94 in the current Iranian year’s 10th month (Dec. 22-Jan. 20) from 50.97 registered in the previous month, indicating a 4.03-point or 7.87% decline.
According to the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture, the sponsor and coordinator of the report, the survey shows most businesses faced a severe shortage of demand.
The continuing trend of rising costs, coupled with concerns about tax increases, has put many businesses, especially in the services sector, on the verge of closure.
On the one hand, in the current situation, many firms cannot withstand any more increase in costs and shortage of liquidity. On the other, uncertainty caused by the international atmosphere of the country and its impact on foreign exchange rates have reduced demand.
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 continuing trend of rising costs, coupled with concerns about tax increases, has put many businesses, especially in the services sector, on the verge of closure
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 53.86 in the current fiscal year’s eighth month (Oct. 23-Nov. 21) to 47.07 in the 10th month (Dec. 22-Jan. 20).
The “new orders” sub-index increased from 47.38 in the eighth month to 48 in the ninth month, but declined to 43.14 in the 10th month.
The “supplier deliveries” sub-index, which measures how fast deliveries are made, increased from 54.6 in the month ending Nov. 21 to 59.23 in the month ending Dec. 21, but decreased to 52.42 in the month ending Jan. 20.
The “raw materials inventory” sub-index increased from 44.62 in the month ending Nov. 21 to 46.49 in the month ending Dec. 21, but declined to 43.81 in the month ending Jan. 20.
The PMI reading of “employment” sub-index declined from 44.62 in the month ending Nov. 21 to 48.74 in the month ending Dec. 21, but grew to 49.91 in the month ending Jan. 20.
To calculate PMI, seven secondary criteria are 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 83.13 in the month ending Nov. 21 to 82.01 in the month ending Dec. 21 and decreased to 75.68 in the month ending Jan. 20.
The “warehouse inventory” sub-index increased from 48.6 in the month ending Nov. 21 to 49.72 in the month ending Dec. 21, but grew to 50 in the month ending Jan. 20.
The “exports” sub-index decreased from 48.38 in the eighth month to 47.77 in the ninth month and declined to 47.14 in the 10th month.
The “prices of manufactured products or services” sub-index decreased from 63.14 in the month ending Nov. 21 to 55.39 in the month ending Dec. 21, but grew to 58.25 in the month ending Jan. 20.
The “fuel consumption” sub-index increased from 64.74 in the month ending Nov. 21 to 67.88 in the month ending Dec. 21 and grew to 67.88 in the month ending Jan. 20.
The “sales” sub-index decreased from 54.74 in the month ending Nov. 21 to 54.03 in the month ending Dec. 21 and declined to 47.61 in the month ending Jan. 20.
The sub-index of “business output forecasts for the following month” decreased from 59.74 in the month ending Nov. 21 to 56.03 in the month ending Dec. 21, but increased to 58.37 in the month ending Jan. 20.
The overall PMI decreased from 51.07 in the month ending Nov. 21 to 50.97 in the month ending Dec. 21 and declined to 46.94 in the month ending Jan. 20.
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.
