The Purchasing Managers' Index for Iran’s overall economy staged a retreat in the third month of the current Iranian year (May 22-June 21) after it emerged from the Norouz (Iranian New Year holidays) contraction in the second month, new data released by the Statistics and Economic Analysis Center of the Iran Chamber of Commerce, Industries, Mines and Agriculture show.
PMI settled at 53.28 from 57.3 registered in the second month, indicating a 4.02-point or 7.01% decline.
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.
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 increased more strongly compared to previous years with the resumption of activities in most companies in the second month, ICCIMA noted in the previous report.
However, companies faced a series of impediments in production activities in the third month, including difficulty in procuring foreign currencies to import raw materials, wild fluctuations in prices, cash crunch, gas and electricity cuts, pause in petrochemical plants’ feedstock supply as they await new prices and higher costs imposed by taxation, the new report said.
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 34.6 in the first month of the year (March 21-April 20) to 60.96 in the second month, but declined to 57.26 in the third month.
“New orders” increased from 37.65 in the first month to 57.15 in the second month, but declined to 49.96 in the third month.
“Supplier deliveries”, which measures how fast deliveries are made, grew from 50.03 in the month to April 20 to 57.43 in the month ending May 21 to 58.22 in the month ending June 21.
“Raw materials inventory” increased from 43.14 in the month ending April 20 to 58.08 in the month ending May 21, but declined to 46.56 in the month ending June 21.
The “employment” sub-index decreased from 51.37 in the first month to 52.48 in the second month and to 52.95 in the third 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 86.54 in the month ending April 20 to 83.67 in the month ending May 21 and to 73.22 in the month ending June 21.
“Warehouse inventory” increased from 45.58 in the first month to 49.3 in the second month and to 53.42 in the second month.
The “exports” sub-index grew from 40.53 in the month ending April 20 to 51.86 in the month ending May 21 and to 51.37 in the month to June 21.
“Prices of manufactured products or services” decreased from 71.44 in the month to April 20 to 62.52 in the month ending May 21, and to 58.16 in the month to June 21.
“Fuel consumption” grew from 34.3 in the first month to 61.28 in the second month, but declined to 56.75 in the third month of the year.
The “sales” sub-index increased from 34.69 in the month ending April 20 to 64.09 in the month to May 21, but decreased to 50.65 in the month ending June 21.
The sub-index of “business output forecasts for the following month” declined from 75.76 in the month to April 20 to 65.17 in the month to May 21, and to 60.17 in the month to June 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.
