The Purchasing Managers' Index for Iran’s economy emerged from the Norouz (Iranian New Year) contraction in the second month of the fiscal year (April 21-May 21), new data released by the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture show.
PMI settled at 57.3 from 42.04 registered in the first month, indicating a 15.26-point or 36.29% increase.
Most sub-indexes indicated strong growth, as they do every year in the second month of the year.
Since companies were experiencing a longer shutdown in the first month of the year compared to previous years due to price uncertainty and lack of foreign currency to supply raw materials, the index has increased more strongly compared to previous years with the resumption of activities in most companies in the second month, ICCIMA noted.
However, companies continue to grapple with foreign currency problems, constant changes in laws and regulations and a sharp increase in prices, it added.
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 decreased from 60.81 in the 12th month of last fiscal year (Feb. 20-March 20) to 34.6 in the first month of the new year (March 21-April 20), but increased to 60.96 in the second month of the current Iranian year (April 21-May 21).
“New orders” decreased from 54.97 in the 12th month of last year to 37.65 in the first month of the current fiscal year, but grew to 57.15 in the second month.
“Supplier deliveries”, which measures how fast deliveries are made, declined from 61.48 in the month to March 20 to 50.03 in the month ending April 20, but grew to 57.43 in the month ending May 21.
“Raw materials inventory” declined from 54.14 in the month ending March 20 to 43.14 in the month ending April 20, but grew to 58.08 in the month ending May 21.
The “employment” sub-index decreased from 52.28 in the 12th month of last year to 51.37 in the first month of the new Iranian year, but increased to 52.48 in the second month.
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 declined from 87.61 in the month ending March 20 to 86.54 in the month ending April 20 and to 83.67 in the month ending May 21.
“Warehouse inventory” increased from 45.18 in the 12th month of last fiscal year to 45.58 in the first month of the current fiscal year and to 49.3 in the second month.
The “exports” sub-index declined from 48.81 in the month ending March 20 to 40.53 in the month ending April 20, but grew to 51.86 in the month ending May 21.
“Prices of manufactured products or services” grew from 69.94 in the month ending March 20 to 71.44 in the month ending April 20, but declined to 62.52 in the month ending May 21.
“Fuel consumption” decreased from 54.02 in the month ending March 20 to 34.3 in the month ending April 20, but increased to 61.28 in the month ending May 21.
The “sales” sub-index declined from 61.18 in the month ending March 20 to 34.69 in the month ending April 20, but increased to 64.09 in the month ending May 21.
The sub-index of “business output forecasts for the following month” grew from 36.48 in the month ending March 20 to 75.76 in the month ending April 20, but declined to 65.17 in the month ending May 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.
