The Purchasing Managers' Index for Iran’s overall economy stood at an all-time high of 56.79 in the 12th month of last Iranian year (Jan. 21-Feb. 19), new data released by the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture show.
Based on the ICCIMA report, besides the seasonal hike experienced by the index at the end of the fiscal year (which is followed by a decline in the first month of the new Iranian year that coincides with the Norouz holidays from March 20 to April 2), companies witness a dramatic rise in sales amid high inflationary expectations and the extreme devaluation of the national currency, rial.
Fearing a further rise in prices and a drop in the value of national currency, companies moved to buy their raw materials and customers filled up their stocks in the final month of last Iranian year, which manifested in the record rise in the benchmark index.
According to the data, PMI settled at 56.79 in the 12th month of the year from 51.35 registered in the previous month, indicating a 5.46-point or 10.59% increase.
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.
Main PMI Indexes
The ICCIMA survey has five main indices to calculate the overall PMI.
According to the report, the “activity level” index increased from 39.48 in the 10th month of the year (Dec. 22, 2022-Jan. 20) to 53.45 in the 11th month (Jan. 21-Feb. 19) to 60.81 in the 12th month (Feb. 20-March 20).
The “new orders” index increased from 40.82 in the 10th month to 49.6 in the 11th month and to 54.97 in the 12th month.
The “supplier deliveries” index, which measures how fast deliveries are made, increased from 43.35 in the month to Jan. 20 to 57.72 in the month ending Feb. 19 to 61.48 in the month ending March 20.
The “raw materials inventory” index grew from 39.54 in the month ending Jan. 20 to 42.2 in the month ending Feb. 19 to 54.14 in the month ending March 20.
The PMI reading of “employment” index increased from 46.62 in the 10th month to 51.14 in the 11th month to 52.28 in the 12th month.
Sub-Indices
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 85.26 in the month ending Jan. 20 to 86.49 in the month ending Feb. 19 and 87.61 in the month ending March 20.
The “warehouse inventory” sub-index increased from 46.58 in the 10th month to 47.93 in the 11th month, but declined to 45.18 in the 12th month.
The “exports” sub-index declined from 45.74 in the 10th month to 44.54 in the 11th month and to 48.81 in the 12th month.
The “prices of manufactured products or services” sub-index grew from 59.61 in the month to Jan. 20 to 61.84 in the month to Feb. 19 and to 69.94 in the month ending March 20.
The “fuel consumption” sub-index increased from 59.09 in the month ending Jan. 20 to 59.62 in the month ending Feb. 19, but decreased to 54.02 in the month ending March 20.
The “sales” sub-index grew from 43.31 in the 10th month to 57.21 in the 11th month and to 61.18 in the 12th month.
The sub-index of “business output forecasts for the following month” increased from 52.7 in the month ending Jan. 20 to 55.97 in the month ending Feb. 19, but declined to 36.48 in the month ending March 20.
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.
