The Purchasing Managers' Index for the industrial sector of Iran has dropped for the third consecutive month and broken below the threshold mark (50), 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 fifth month (July 23-Aug. 22), PMI for the industrial sector settled at 48.45 from 53.93 in the preceding month (June 22-July 22), indicating a 10.16% 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.
“Machine-making and home appliances" posted the highest PMI with a reading of 53.75 while “clothing and leather” registered the lowest PMI of 35.
The report noted that besides the fact that the fifth month of the Iranian year coincides with the summer holiday, which is characterized by a seasonal slump in the production of certain companies every year, many firms have been suffering from power cuts and a sharp decline in demand in recent years.
“Moreover, many customers have postponed placing orders, as they await the outcome of nuclear talks. Their demand has significantly dropped due to a shortage of financial resources and diminished purchasing power,” it said.
Five Main Sub-Indices
The "production" sub-index for Iran’s industrial sector decreased from 62.65 in the third fiscal month (May 22-June 21) to 53.28 in the fourth month of the current fiscal year (June 22-July 22) to 46.62 in the fifth month.
“Machine producers and home appliances" recorded the highest PMI of the production sector (63.64) while “rubber and plastic” registered the lowest PMI with a reading of 30.
The "new orders" sub-index decreased from 59.61 in the month ending June 21 to 52.04 in the month ending July 22 to 43.6 in the month ending Aug. 22, with top-performers being “others” (70) and the worst being "clothing and leather” (16.67).
The "supplier deliveries" sub-index, which measures how fast deliveries are made, decreased from 62.17 in the month ending June 21 to 57.11 in the month ending July 22, but increased to 58.01 in the month ending Aug. 22.
The highest supplier deliveries PMI was posted by "machine producers and home appliances" with a reading of 65.91 and the lowest was recorded for "others", "clothing and leather” and “textile industries” each with a reading of 50.
The "raw material inventory" sub-index decreased from 51.88 in the month ending June 21 to 51.53 in the month ending July 22 and further to 42.58 in the month ending Aug. 22.
"Chemical industries” posted the highest PMI with 52.17 while “textile industries” registered the lowest PMI reading of 18.18 among all groups.
The PMI reading of "employment" sub-index decreased from 57.96 in the month ending June 21 to 56.39 in the month ending July 22 to 53.77 in the month ending Aug. 22.
Industries classified as "rubber and plastic" and “others” posted the highest PMI reading (each with 60) whereas "clothing and leather" posted the lowest PMI (44.44).
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 82.94 in the month ending June 21 to 68.65 in the month ending July 22 to 58.69 in the month ending Aug. 22.
The highest PMI was recorded for “others” with a reading of 80 and the lowest for "wood, paper and furniture” with 36.36.
The "warehouse inventory" sub-index increased from 48.94 in the month ending June 21 to 56.04 in the month ending July 22, but decreased to 51 in the month ending Aug. 22.
The lowest PMI reading for "warehouse inventory" sub-index was recorded for “petroleum and gas products" with 26.47 and the highest was registered for “clothing and leather” with 61.11.
The "exports" sub-index decreased from 50.14 in the month ending June 21 to 48.19 in the month ending July 22 and declined to 46.9 in the month ending Aug. 22.
PMI reading of "exports" sub-index was the highest for "metallic industries” (58.7) and lowest for "non-metallic mineral industries" (25).
The "prices of manufactured products" sub-index decreased from 63.29 in the month ending June 21 to 51.14 in the month ending July 22 to 44.96 in the month ending Aug. 22.
"Others" recorded the highest PMI of 60 during the period while "clothing and leather” posted the lowest PMI of 27.78.
The "fuel consumption" sub-index decreased from 63.79 in the month ending June 21 to 54.28 in the month ending July 22, but declined to 50.32 in the month ending Aug. 22.
Industries categorized as "others” registered the highest PMI measured for "fuel consumption" (with 60) while “clothing and leather" registered the lowest (38.89).
The "sales" sub-index decreased from 60.98 in the third month of the current year to 47.08 in the fourth fiscal month to 43.01 in the fifth month of the fiscal 2022-23.
“Others” posted the highest sales PMI with a reading of 60 while “rubber and plastic” registered the lowest PMI with a reading of 20.
The "production forecasts for the following month" sub-index increased from 57.63 in the month ending June 21 to 60.97 in the month ending July 22 to 66.75 in the month ending Aug. 22. Its sub-index "others" registered the highest PMI reading of 90 and "rubber" the lowest PMI reading of 55.
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.
