The Purchasing Managers' Index for Iran’s economy experienced a significant drop in the first month of the current fiscal year (March 21-April 20), new data released by the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture show.
The index settled at 42.04 from 56.79 registered in the previous month, indicating a 14.75-point or 25.97% decrease.
Most sub-indexes indicated recession as they do every year in the first month of the year that coincides with the long Iranian New Year holidays (starting March 21), which last more than two weeks.
“This year, however, most companies experienced longer shutdowns due to volatile foreign exchange rates against the rial and problems related to procuring raw materials, besides the fact that Norouz holidays coincided with Ramadan,” ICCIMA reported, adding that expectations for improvement of conditions in the second month of the year are higher.
“Severe uncertainty regarding prices, in addition to constant changes in laws and regulations, has caused concern for companies when it comes to short-term planning.”
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 Sub-Indexes
The ICCIMA survey has five main sub-indexes to calculate the overall PMI.
According to the report, the “activity level” sub-index increased from 53.45 in the 11th month of last fiscal year (Jan. 21-Feb. 19) to 60.81 in the 12th month (Feb. 20-March 20), but declined to 34.6 in the first month of the new year (March 21-April 20).
“New orders” increased from 49.6 in the 11th month to 54.97 in the 12th month of last year, but declined to 37.65 in the first month of the current fiscal year.
“Supplier deliveries”, which measures how fast deliveries are made, increased from 57.72 in the month to Feb. 19 to 61.48 in the month ending March 20, but decreased to 50.03 in the month ending April 20.
“Raw materials inventory” grew from 42.2 in the month ending Feb. 19 to 54.14 in the month ending March 20, but declined to 43.14 in the month ending April 20.
The “employment” sub-index increased from 51.14 in the 11th month to 52.28 in the 12th month of last year, but declined to 51.37 in the first month of the new Iranian year.
Secondary Sub-Indexes
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 86.49 in the month ending Feb. 19 to 87.61 in the month ending March 20, but decreased to 86.54 in the month ending April 20.
“Warehouse inventory” increased from 47.93 in the 11th month to 45.18 in the 12th month of the last year and to 45.58 in the 1st month of the current fiscal.
The “exports” sub-index grew from 44.54 in the month ending Feb. 19 to 48.81 in the month ending March 20, but decreased to 40.53 in the month ending April 20.
“Prices of manufactured products or services” grew from 61.84 in the month ending Feb. 19 to 69.94 in the month ending March 20 and to 71.44 in the month ending April 20.
“Fuel consumption” increased from 59.62 in the month ending Feb. 19 to 54.02 in the month ending March 20, but decreased to 34.3 in the month ending April 20.
The “sales” sub-index grew from 57.21 in the month ending Feb. 19 to 61.18 in the month ending March 20, but declined to 34.69 in the month ending April 20.
The sub-index of “business output forecasts for the following month” decreased from 55.97 in the month ending Feb. 19 to 36.48 in the month ending March 20, but increased to 75.76 in the month ending April 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.
