The Purchasing Managers' Index for the industrial sector of Iran has dropped for the second consecutive month, the latest data released by the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture show.
In the current fiscal year’s fourth month (June 22-July 22), the PMI for industrial sector settled at 53.93 from 59.65 in the preceding month (May 22-June 21), indicating a 9.59% fall.
Locally known by its Farsi acronym Shamekh, PMI is an indicator of the economic health of 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, under 50 indicates a contraction and a reading of 50 shows no change compared with the previous month. 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.
"Vehicles and related parts" posted the highest PMI with a reading of 58.5 while “clothing and leather” registered the lowest PMI of 42.5.
The surveyed manufacturers say recurrent power cuts led to a decline in production during the month under review.
“On the other hand, they say they are facing a severe shortage of financial resources as a result of runaway inflation and a decline in their customers’ purchasing power. They also faced difficulty in procuring raw materials for production due to a decline in their working capital and lack of banking loans. Summer holidays and commemorations pertaining to Muharram [the first month of the lunar Islamic calendar] also played a role in production decline. Specifically, major industries related to food and clothing have seen a steep decline in demand over rising prices and dwindling purchasing power of customers,” according to the report’s findings.
Five Main Sub-Indices
The "production" sub-index for Iran’s industrial sector decreased from 69.29 in the second fiscal month (April 21-May 21) to 62.65 in the third month of the current fiscal year (May 22-June 21) to 53.28 in the third month.
“Non-metallic mineral industries" recorded the highest PMI of the production sector (72.2) while “food products” registered the lowest PMI with a reading of 40.
The "new orders" sub-index decreased from 64.88 in the month ending May 21 to 59.61 in the month ending June 21 to 52.04 in the month ending July 22, with top-performers being “textile industries” (65) and the worst being "others” (25).
The "supplier deliveries" sub-index, which measures how fast deliveries are made, decreased from 67.48 in the month ending May 21 to 62.17 in the month ending June 21 to 57.11 in the month ending July 22.
The highest supplier deliveries PMI was posted by "non-metallic mineral industries" with a reading of 66.7 and the lowest was recorded for "others" with a reading of 37.5.
The "raw material inventory" sub-index increased from 47.95 in the month ending May 21 to 51.88 in the month ending June 21 but declined to 51.53 in the month ending July 22.
"Wood, paper and furniture" posted the highest PMI with 63.6 while "others" registered the lowest PMI reading of 25 among all groups.
The PMI reading of "employment" sub-index increased from 57.54 in the month ending May 21 to 57.96 in the month ending June 21 but declined to 56.39 in the month ending July 22.
Industries classified as " vehicles and related parts" posted the highest PMI reading (64.8) whereas "others" posted the lowest PMI (37.5).
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 89.91 in the month ending May 21 to 82.94 in the month ending June 21 to 68.65 in the month ending July 22.
The highest PMI was recorded for “others” with a reading of 87.5 and the lowest for "rubber and plastic” with 45.
The "warehouse inventory" sub-index decreased from 49.92 in the month ending May 21 to 48.94 in the month ending June 21 but increased to 56.04 in the month ending July 22.
The lowest PMI reading for "warehouse inventory" sub-index was recorded for “wood, paper and furniture" with 40.9 and the highest was registered for “non-metallic mineral industries” with 77.8.
The "exports" sub-index increased from 49.41 in the month ending May 21 to 50.14 in the month ending June 21 and declined to 48.19 in the month ending July 22.
PMI reading of "exports" sub-index was the highest for "chemical industries” (55.1) and lowest for "clothing and leather" (28.6). The "prices of manufactured products" sub-index decreased from 66.04 in the month ending May 21 to 63.29 in the month ending June 21 to 51.14 in the month ending July 22.
"Petroleum and gas products" recorded the highest PMI of 67.6 during the period while "wood, paper and furniture” posted the lowest PMI of 40.9.
The "fuel consumption" sub-index increased from 63.58 in the month ending May 21 to 63.79 in the month ending June 21 but declined to 54.28 in the month ending July 22.
Industries categorized as "non-metallic mineral industries” registered the highest PMI measured for "fuel consumption" (with 85.7) while “clothing and leather" registered the lowest (42.9).
The "sales" sub-index decreased from 63.02 in the second month of the current year to 60.98 in the third fiscal month to 47.08 in the fourth month of the fiscal 2022-23.
“Wood, paper and furniture” posted the highest sales PMI with a reading of 63.6 while “clothing and leather” registered the lowest PMI with a reading of 28.6.
The "production forecasts for the following month" sub-index decreased from 64.7 in the month ending May 21 to 57.63 in the month ending June 21 but increased to 60.97 in the month ending July 22. Its sub-index "others" registered the highest PMI reading of 75 and "clothing and leather" the lowest PMI reading of 35.7.
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.
