The Purchasing Managers' Index for the industrial sector of Iran has dropped in the third month of the current fiscal year (May 22-June 21) after a spike in the second month, which in turn followed a slump registered at the start of the Iranian New Year (March 21).
In the current fiscal year’s third month, the PMI for the industrial sector settled at 59.65 from 63.21 in the preceding month (April 21-May 21), indicating a 5.63% decline, according to the latest data released by the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries and Mines.
Locally known by its Farsi acronym Shamekh, 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.
"Vehicles and related parts" posted the highest PMI with a reading of 68.5 while "clothing and leather" registered the lowest PMI of 47.1.
The depreciation of the national currency has increased the prices of raw materials which, combined with a rise in other input costs such as wages and energy carriers, has hiked the end prices of products, the report said.
“The Ministry of Industries, Mining and Trade’s command pricing in certain fields means producers are selling their products at extremely low profit margins. Some are even loss-making.”
Power cuts, particularly those without prior notice, have also caused trouble for producers, it added.
Five Main Sub-Indices
The "production" sub-index for Iran’s industrial sector increased from 31.23 in the first fiscal month (March 21-April 20) to 69.29 in the second month of the current fiscal year (April 21-May 21) and grew to 69.29 in the third month.
“Vehicles and related parts" recorded the highest PMI of the production sector (80.4) while “food products” registered the lowest PMI with a reading of 50.
The "new orders" sub-index increased from 28.40 in the month ending April 20 to 64.88 in the month ending May 21 and decreased to 59.61 in the month ending June 21, with top-performers being “vehicles and related parts” (76.8) and the worst being "clothing and leather” (33.3).
The "supplier deliveries" sub-index, which measures how fast deliveries are made, increased from 47.39 in the month ending April 20 to 67.48 in the month ending May 21 and declined to 62.17 in the month ending June 21.
The highest supplier deliveries PMI was posted by "vehicles and related parts" with a reading of 73.2 and the lowest was recorded for "clothing and leather" with a reading of 50.
The "raw material inventory" sub-index increased from 38.98 in the month ending April 20 to 47.95 in the month ending May 21 and grew to 51.88 in the month ending June 21.
"Wood, paper and furniture" posted the highest PMI with 81.8 while "petroleum and gas products" registered the lowest PMI reading of 32.4 among all groups.
The PMI reading of "employment" sub-index increased from 48.44 in the month ending April 20 to 57.54 in the month ending May 21 and reached 57.96 in the month ending June 21.
Industries classified as "wood, paper and furniture" posted the highest PMI (72.7) whereas "petroleum and gas products " posted the lowest PMI (47.1).
Seven Secondary Criteria
To calculate PMI, seven secondary criteria were also 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 85.44 in the month ending April 20 to 89.91 in the month ending May 21 and declined to 82.94 in the month ending June 21.
All 12 groups registered PMI readings higher than 50 for "raw material purchase price" sub-index in the second month of the current fiscal year. The highest PMI was recorded for “food industries” with a reading of 92.9 and the lowest for "metallic industries” with 72.2.
The "warehouse inventory" sub-index increased from 48.32 in the month ending April 20 to 49.93 in the month ending May 21 and declined to 48.94 in the month ending June 21.
The lowest PMI reading for "warehouse inventory" sub-index was recorded for “petroleum and gas products" with 41.2 and the highest was registered for “wood, paper and furniture” with 63.6.
The "exports" sub-index increased from 42.95 in the month ending April 20 to 49.41 in the month ending May 21 and grew to 50.14 in the month ending June 21.
PMI reading of "exports" sub-index was the highest for "wood, paper and furniture” (68.2) and lowest for "petroleum and gas products" (38.2).
The "prices of manufactured products" sub-index decreased from 70.97 in the month ending April 20 to 66.04 in the month ending May 21 and declined to 63.29 in the month ending June 21.
"Non-metallic mineral industries" recorded the highest PMI of 85.7 during the period while "wood, paper and furniture” posted the lowest PMI of 45.5.
The "fuel consumption" sub-index increased from 37.43 in the month ending April 20 to 63.58 in the month ending May 21 and grew to 63.79 in the month ending June 21.
Industries categorized as "others” registered the highest PMI measured for "fuel consumption" (with 85.7) while “rubber and plastic" registered the lowest (50).
The "sales" sub-index increased from 25.13 in the first month of the current year to 63.02 in the second fiscal month and declined to 60.98 in the third month of the fiscal 2022-23.
“Vehicles and related parts” posted the highest sales PMI with a reading of 76.8 while “food industries” registered the lowest PMI each with a reading of 43.3.
The "production forecasts for the following month" sub-index decreased from 74.01 in the month ending April 20 to 64.7 in the month ending May 21 and decreased to 57.63 in the month ending June 21. Its sub-index "vehicles and related parts" registered the highest PMI reading of 73.2 and "clothing leather" the lowest PMI reading of 41.7.
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.
