The Purchasing Managers’ Index for Iranian industries in the current fiscal year’s 10th month (Dec. 22-Jan. 20) settled at 50.31 from 56.53 in the preceding month (Nov. 22-Dec. 21), indicating an 11% 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, contrary to last month's positive expectations of producers, most industries have now been forced to cut production due to a sharp drop in orders. All industries have faced a rising growth in gas prices which, along with concerns about tax increases, have made it very difficult for them to plan ahead, given the people’s declining purchasing power.
The petrochemical industry is still struggling with its raw material supply chain and automakers have caused problems for auto parts makers by not paying their outstanding debts. Medicines and food on which heavy subsidies are spent end up being shipped abroad due to lack of proper supervision.
Locally known by its Farsi acronym Shamekh, PMI is an indicator of economic health for manufacturing and services sectors. It provides information about current business conditions to companies’ decision-makers, analysts and purchasing managers.
The headline PMI is a number from 0 to 100. A PMI above 50 represents an expansion compared with the previous month. A PMI reading under 50 represents a contraction and a reading of 50 indicates no change. The further away from 50, the greater the level of change.
PMI is based on a monthly survey sent to senior executives of more than 400 companies. It is based on five major survey areas: new orders (30%), raw material inventory (10%), production (25%), supplier deliveries (15%) and employment (20%).
The survey poses 12 questions about business conditions and any changes, whether it is improving, no changes or deteriorating.
"Rubber and Plastic" posted the highest PMI with a reading of 56.63 during the month under review while "metallic industries" registered the lowest PMI of 37.81.
Five Main Sub-Indices
The "production" sub-index for Iran’s industrial sector decreased from 51.31 in the current fiscal year’s eighth month (Oct. 23-Nov. 21) to 58.84 in the ninth month (Nov. 22-Dec. 21) and declined to 50.54 in the 10th month.
Industries classified as "others" recorded the highest PMI of the "production" sector (75) while "non-metallic mineral industries" registered the lowest PMI with a reading of 35.
The "new orders" sub-index declined from 57.36 in the month ending Nov. 21 to 53.33 in the month ending Dec. 21 and decreased to 44.9 in the month ending Jan. 20, with the top-performing industries being "metallic industries" (52.17) and the worst being "clothing and leather" (30).
The "supplier deliveries" sub-index, which measures how fast deliveries are made, increased from 60.63 in the month ending Nov. 21 to 65.38 in the month ending Dec. 21, but declined to 57.5 in the month ending Jan. 20.
The highest supplier deliveries PMI was posted by "clothing and leather" with a reading of 80 and the lowest was recorded for "rubber and plastic" with a reading of 43.75.
The "raw material inventory" sub-index increased from 47.75 in the month ending Nov. 21 to 52.6 in the month ending Dec. 21, but declined to 46.21 in the month ending Jan. 20.
"Wood, paper and furniture" posted the highest PMI with 53.33 while "petroleum and gas products industries" registered the lowest PMI reading of 30.56 among all groups.
The PMI reading of "employment" sub-index declined above the threshold. It decreased from 56.1 in the month ending Nov. 21 to 53.78 in the month ending Dec. 21, but increased to 54.79 in the month ending Jan. 20.
Industries classified as "metallic industries" posted the highest PMI reading (60.87) whereas "rubber and plastic" posted the lowest PMI with 43.75.
Seven Secondary Criteria
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 decreased from 85.12 in the month ending Oct. 22 to 80.25 in the month ending Nov. 21 and decreased to 75.91 in the month ending Dec. 21.
All 12 groups registered PMI readings of higher than 50 for "raw material purchase price" sub-index in the 10th fiscal month. The highest PMI was recorded for "others with a reading of 100 and the lowest for industries categorized as "metallic industries" with 67.39.
The "warehouse inventory" sub-index increased from 48.35 in the month ending Oct. 22 to 52.82 in the month ending Nov. 21 and grew to 53.14 in the month ending Dec. 21.
The lowest PMI reading for "warehouse inventory" sub-index was recorded for "vehicles and related components" with 33.3 and the highest was registered for "rubber and plastic" with 68.75.
The "exports" sub-index decreased from 54.7 in the month ending Oct. 22 to 45.37 in the month ending Nov. 21, but increased to 49.43 in the month ending Dec. 21.
PMI reading of "exports" sub-index was the highest for "vehicles and related components" (54.17) and lowest for industries categorized as "others" (37.5).
The "prices of manufactured products" sub-index decreased from 62.63 in the month ending Oct. 22 to 55.02 in the month ending Nov. 21, but grew to 57.55 in the month ending Dec. 21.
"Others" recorded the highest PMI of 75 during the ninth month of the Iranian year while industries classified as "metallic industries" posted the lowest PMI reading of 48.91.
The "fuel consumption" sub-index decreased from 66.08 in the month ending Oct. 22 to 64.51 in the month ending Nov. 21 and declined to 60.99 in the month ending Dec. 21.
Industries categorized as "machine producers and home appliances" registered the highest PMI measured for "fuel consumption" (76) while “wood, paper and furniture" registered the lowest (46.67).
The "sales" sub-index decreased from 57.67 in the eighth month of the current year to 54.12 in the ninth month and declined to 45.63 in the 10th fiscal month.
“Petroleum and gas industries” posted the highest sales PMI each with a reading of 61.11 while rubber and plastic registered the lowest PMI with a reading of 31.25.
The "production forecasts for the following month" sub-index decreased from 62.57 in the month ending Nov. 21 to 62.05 in the month ending Dec. 21 and declined to 61.62 in the month ending Jan. 20. Its sub-index "non-metallic industries" registered the highest PMI reading of 78 and "wood, paper and furniture" the lowest PMI reading of 43.33.
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.
