New data released by the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture show the Purchasing Managers' Index for the Iranian economy has shrank to a six-month low.
The index settled at 47.39 in the eighth month of the current Iranian year (Oct. 23-Nov. 21) from 50.19 registered in the previous month, indicating a 2.8-point or 5.57% decrease.
ICCIMA noted that the decline in the index is mostly the result of recession in the construction, services and agriculture sectors.
PMI indicates the prevailing direction of economic trends in the manufacturing and services sectors. 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 index is indicative of the prevailing direction of a country’s economic trends, aiming to provide information about business conditions to company directors, analysts and purchasing managers.
“Companies continue to face a sharp decline in demand, especially in the services and agriculture sectors, as well as a fall in sales. As in the previous month, shortage of financial resources and the recent events in the country [read protests] further contributed to this downtrend. On the other hand, the depreciation of the national currency is worsening the conditions for businesses along with diminishing purchasing power,” ICCIMA said.
The Iranian rial has lost more than 40% of its value against the dollar since the start of the last Iranian year. Since the beginning of the fiscal 2020-21 to date, the value of the dollar against the rial has increased by 125%.
PMI Sub-Indexes
The ICCIMA survey has five main indices to calculate the overall PMI.
According to the report, the “business output” sub-index decreased from 52.34 in the sixth month of the current fiscal year (Aug. 23-Sept. 22) to 51.6 in the seventh fiscal month (Sept. 23-Oct. 22) and to 46.24 in the eighth fiscal month (Oct. 23-Nov. 21).
The “new orders” sub-index decreased from 52.87 in the sixth fiscal month to 46.82 in the seventh month and to 43.91 in the eighth month.
The “supplier deliveries” sub-index, which measures how fast deliveries are made, increased from 54.05 in the month ending Sept. 22 to 54.78 in the month ending Oct. 22, but declined to 51.73 in the month ending Nov. 21.
The “raw materials inventory” sub-index increased from 45.22 in the month ending Sept. 22 to 46.28 in the month ending Oct. 22 and 51.26 in the month ending Nov. 21.
The PMI reading of “employment” sub-index decreased from 52.53 in the month ending Sept. 22 to 52 in the month ending Oct. 22 and 48.88 in the month ending Nov. 21.
To calculate PMI, seven secondary criteria are 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 increased from 69.4 in the month ending Sept. 22 to 71.8 in the month ending Oct. 22 and 78.49 in the month ending Nov. 21.
The “warehouse inventory” sub-index increased from 51.09 in the month ending Sept. 22 to 52.99 in the month ending Oct. 22, but declined to 48.86 in the month ending Nov. 21.
The “exports” sub-index increased from 45.24 in the sixth month of the current fiscal year to 47.05 in the seventh month, but decreased to 45.69 in the eighth month.
The “prices of manufactured products or services” sub-index increased from 54.57 in the month ending Sept. 22 to 57.45 in the month ending Oct. 22, but declined to 55.47 in the month ending Nov. 21.
The “fuel consumption” sub-index increased from 45.32 in the month ending Sept. 22 to 46.11 in the month ending Oct. 22 and 49.8 in the month ending Nov. 21.
The “sales” sub-index decreased from 52.83 in the month ending Sept. 22 to 42.56 in the month ending Oct. 22, but increased to 48.21 in the month ending Nov. 21.
The sub-index of “business output forecasts for the following month” increased from 52.47 in the month ending Sept. 22 to 59.58 in the month ending Oct. 22, but decreased to 52.62 in the month ending Nov. 21.
The overall PMI decreased from 52.08 in the month ending Sept. 22 to 50.19 in the month ending Oct. 22 and remained unchanged in the month ending Nov. 21.
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.
