The Purchasing Managers' Index for the industrial sector of Iran rallied in the current fiscal year’s sixth month (Aug. 23-Sept. 22) after three consecutive months of decline to stand above the threshold mark (50), latest data released by the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture show.
PMI for the industrial sector settled at 53.25 in the sixth month from 48.45 in the preceding month (July 23-Aug. 22), indicating a 9.9% rise.
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.
“Metallic industries" posted the highest PMI with a reading of 59.4 while “clothing and leather” registered the lowest PMI of 41.6.
“As expected, the activities gathered pace after the summer holidays in the sixth month of the current fiscal year, but due to the instability of prices and the reduction of purchasing power and shortage of financial resources, there is a strong need for banks to provide working capital, which unfortunately do not cooperate in providing facilities. Given the high price of raw materials and their low quality, there is no money to make purchases,” the report said.
Five Main Sub-Indices
The "production" sub-index for Iran’s industrial sector decreased from 53.28 in the fourth fiscal month (June 22-July 22) to 46.62 in the fifth month of the current fiscal year (July 23-Aug. 22) but increased to 55.74 in the sixth month.
“Others" recorded the highest PMI of the production sector (70) while “wood, paper and furniture” registered the lowest PMI with a reading of 35.
The "new orders" sub-index decreased from 52.04 in the month ending July 22 to 43.6 in the month ending Aug. 22 but grew to 50.76 in the month ending Sept. 22, with top-performers being “metallic mineral industries” (70) and the worst being "wood, paper and furniture” (30).
The "supplier deliveries" sub-index, which measures how fast deliveries are made, increased from 57.11 in the month ending July 22 to 58.01 in the month ending Aug. 22, but decreased to 57.12 in the month ending Sept. 22.
The highest supplier deliveries PMI was posted by "rubber and plastic" with a reading of 65 and the lowest was recorded for "clothing and leather” each with a reading of 43.8.
The "raw material inventory" sub-index decreased from 51.53 in the month ending July 22 to 42.58 in the month ending Aug. 22, but increased to 45.05 in the month ending Sept. 22.
"Food products” posted the highest PMI with 53.6 while “others” registered the lowest PMI reading of 20 among all groups.
The PMI reading of "employment" sub-index decreased from 56.39 in the month ending July 22 to 53.77 in the month ending Aug. 22, but to 55.07 in the month ending Sept. 22.
Industries classified as "vehicles and related parts” posted the highest PMI reading (65) whereas "clothing and leather" posted the lowest PMI (40).
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 68.65 in the month ending July 22 to 58.69 in the month ending Aug. 22, but grew to 62.8 in the month ending Sept. 22.
The highest PMI was recorded for “non-metallic mineral industries” with a reading of 87.5 and the lowest for "petroleum and gas products” with 38.5.
The "warehouse inventory" sub-index decreased from 56.04 in the month ending July 22 to 51 in the month ending Aug. 22, but increased to 54.1 in the month ending Sept. 22.
The lowest PMI reading for "warehouse inventory" sub-index was recorded for “wood, paper and furniture " with 40 and the highest was registered for “textile industries” with 72.2.
The "exports" sub-index decreased from 48.18 in the month ending July 22 to 46.9 in the month ending Aug. 22, but grew to 48.48 in the month ending Sept. 22.
PMI reading of "exports" sub-index was the highest for “textile industries” (66.7) and lowest for "non-metallic mineral industries" (29.2).
The "prices of manufactured products" sub-index decreased from 51.14 in the month ending July 22 to 44.96 in the month ending Aug. 22, but increased to 46.95 in the month ending Sept. 22.
"Others" recorded the highest PMI of 60 during the period while "clothing and leather” posted the lowest PMI of 37.5.
The "fuel consumption" sub-index decreased from 54.28 in the month ending July 22 to 50.32 in the month ending Aug. 22, but grew to 51.11 in the month ending Sept. 22.
Industries categorized as "others” registered the highest PMI measured for "rubber and plastic" (65) while “clothing and leather" registered the lowest (43.8).
The "sales" sub-index decreased from 47.08 in the fourth month of the current year to 43.01 in the fifth fiscal month, but increased to 47.79 in the fifth month of the fiscal 2022-23.
“Others” and “rubber and plastic” posted the highest sales PMI each with a reading of 60 while “wood, paper and furniture” registered the lowest PMI with a reading of 30.
The "production forecasts for the following month" sub-index increased from 60.97 in the month ending July 22 to 66.75 in the month ending Aug. 22, but decreased to 62.18 in the month ending Sept. 22. Its sub-index "food products" and “non-metallic mineral industries” each registered the highest PMI reading of 75 and "wood, paper and furniture" the lowest PMI reading of 35.
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.
