The Producer Price Index for the industrial sector in the four-quarter period ending Dec. 21, which marks the end of the third quarter of the current Iranian year, grew by 34.4% compared with the corresponding period of the year before, the Statistical Center of Iran reported.
The PPI of the sector stood at 783.5 in Q3, indicating a 4.3% increase compared with the previous quarter and a 23.6% growth over the same quarter of the year before.
The lowest quarterly PPI inflation rates in Q3 were recorded for “production of paper and paper products” with -1.6%, “production of coke and oil refining products” with 0.9% and “manufacture of chemicals” with 1.2%.
The highest quarterly PPI inflation rates were registered for “production of uncategorized machinery and other equipment” with 24.1%, “production of pharmaceuticals, chemicals used in pharmacy and herbal remedies” with 18% and “production of metal products (except for machinery and equipment)” with 11.4%.
The lowest year-on-year PPI inflation rates were registered for “production of base metals” with 5.9%, “manufacture of chemicals” with 13.1% and “production of coke and oil refining products” with 17.3%. The highest year-on-year increase was posted by “food production” with 62%, “production of pharmaceuticals, chemicals used in pharmacy and herbal remedies” with 60%, and “printing and duplicating the recorded media” with 51% compared with the same quarter of last year.
The lowest annualized PPI inflations were recorded by “production of base metals” with 13.8%, “production of computer, electronic and lighting products” with 19.4% and “production of motor vehicles, trailers, semi-trailers” with 26.4%. The highest annualized rates were registered for “food production” with 71.8%, “printing and duplicating the recorded media” with 53.6% and “other non-metallic minerals” with 51%.
PPI measures price movements from the seller's point of view. Conversely, the consumer price index measures cost changes from the viewpoint of the consumer. In other words, this index tracks changes to the cost of production.
The importance of PPI lies in its predictive content for the future pattern of Consumer Price Index. Changes in PPI are usually reflected in CPI within a short period of time.
PMI for Local Industries Below Threshold
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 10th 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.
The cheap gas price in the country has led to excessive consumption that caused a 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 to meet the growing needs of households.
