According to the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture, the Purchasing Managers' Index for local industries settled at 45.6 in the current Iranian year’s tenth month (Dec. 22-January 20), down from 51.69 in the preceding month (Nov. 22-Dec. 21).
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.
Industries categorized under “Rubber and Plastic" posted the highest PMI with a reading of 53.1 while “Clothing and Leather” registered the lowest of 39.6.
Elaborating on the reasons behind the nosedive in the index, Iran Chamber of Commerce says besides long-standing factors plaguing the Iranian economy, such as runaway inflation, plummeting value of the national currency and ever-dwindling demand in the market, local industries are now grappling with a new challenge, namely “shortage of energy”.
The sharp drop in temperatures in recent weeks, including in the capital Tehran, has led to an unprecedented increase in energy consumption. Iran has also lost gas import from Turkmenistan due to problems in the Central Asian country’s domestic supply network. Moreover, the cheap price of gas in the country has led to excessive consumption leading to shortage despite the fact that it has the world’s second largest reserves. Amid the shortage, the state-run National Iranian Oil Products Distribution Company has cut supply to local industries in a bid to meet the growing needs of households.
Main Indices
The "Production" index for Iran’s industrial sector decreased from 54.1 in the eighth fiscal month (Oct. 23-Nov. 21) to 53.22 in the tenth month of the current fiscal year (Nov. 22-Dec. 21) and to 39.63 in the tenth month.
“Petroleum and Gas Products”, “Textile Industries” and “Non-metallic Mineral Industries” recorded the highest PMI of the production sector each with 50 while “Machine Producers and Home Appliances” registered the lowest PMI with 27.3.
The "New Orders" index declined from 49.86 in the month ending Nov. 21 to 49.1 in the month ending Dec. 21 and to 44.19 in the month ending January 20, with top performers being “Rubber and Plastic” (57.7) and the worst being "Chemical Industries” (34.4).
The "Supplier Deliveries" index, which measures how fast deliveries are made, decreased from 57 in the month ending Nov. 21 to 56.31 in the month ending Dec. 21 and to 53.09 in the month ending January 20.
The highest “Supplier Deliveries” PMI was posted by "Clothing and Leather" with 64.3 and the lowest was recorded for “Machine Producers and Home Appliances” with 43.2.
The "Raw Material Inventory" index decreased from 48.81 in the month ending Nov. 21 to 46.53 in the month ending Dec. 21 and to 43.31 in the month ending January 20.
"Rubber and Plastic” posted the highest PMI with 62.5 while “Clothing and Leather” registered the lowest PMI of 35.7 among all groups.
PMI for the "Employment" index declined from 52.89 in the month ending Nov. 21 to 52.79 in the month ending Dec. 21 and to 50.71 in the month ending January 20. "Rubber and Plastic” posted the highest PMI (57.7) whereas "Textile Industries" posted the lowest PMI (38.9).
Secondary Indices
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 increased from 74.99 in the month ending Nov. 21 to 83.29 in the month ending Dec. 21 and 87.66 in the month ending January 20. The highest PMI was recorded for “Clothing and Leather” with a reading of 100 and the lowest for " Wood, Paper and Furniture” with 66.7.
The "Warehouse Inventory" sub-index increased from 53.27 in the month ending Nov. 21 to 54.27 in the month ending Dec. 21, but decreased to 47.48 in the month ending January 20. The lowest PMI for "Warehouse Inventory" sub-index was recorded for “Petroleum and Gas Products" with 31.3 and the highest was registered for “Food Products” with 59.4.
The "Exports" sub-index declined from 48.73 in the month ending Nov. 21 to 47.28 in the month ending Dec. 21 and to 44.67 in the month ending January 20. PMI of the "Exports" sub-index was highest for “Vehicles and Related Parts” (57.7) and lowest for "Textile Industries" (27.8).
The "Prices of Manufactured Products" sub-index increased from 53.05 in the month ending Nov. 21 to 55.56 in the month ending Dec. 21 and 62.46 in the month ending January 20. "Machine Producers and Home Appliances" recorded the highest PMI of 72.7 during the period while "Wood, Paper and Furniture” posted the lowest PMI of 38.9.
The "Fuel Consumption" sub-index increased from 58.8 in the month ending Nov. 21 to 62.49 in the month ending Dec. 21, but declined to 48.2 in the month ending January 20. Industries categorized as "Machine Producers and Home Appliances” registered the highest PMI measured for "Fuel Consumption" (56.8) while “Non-Metallic Industries" registered the lowest (25).
The "Sales" sub-index increased from 49.96 in the eighth month of the current year to 50.05 in the tenth fiscal month and to 37.4 in the tenth month of the fiscal 2022-23. “Rubber and Plastic” posted the highest sales PMI with 46.2 while “Clothing and Leather” registered the lowest PMI with 28.6.
The "Production Forecasts for the Following Month" sub-index decreased from 59.96 in the month ending Nov. 21 to 58.84 in the month ending Dec. 21, but grew to 62.76 in the month ending January 20. Its sub-index "Textile Industries” registered the highest PMI of 83.3 and "Petroleum and Gas Products" the lowest PMI of 50.
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.
