The Purchasing Managers' Index for Iran’s economy has declined for a second consecutive month.
The latest survey of the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture — the sponsor and coordinator of PMI reports in Iran — shows the index (known by its Farsi acronym Shamekh) settled at 50.1 in the fourth month of the current Iranian year (June 22-July 22) from 54.73 registered in the previous month, indicating a 4.63-point or 8.46% decline.
PMI indicates the prevailing direction of economic trends in the manufacturing and service 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.
It is an index of the prevailing direction of a country’s economic trends, aiming to provide information about business conditions to company directors, analysts and purchasing managers.
A severe decline in purchasing power of customers, shortage of working capital, power cuts and poor management of economic executive bodies have been named as major challenges facing the surveyed companies.
“Many companies are facing problems arising from regulations devised by the customs authorities and those in the central bank. Obstacles related to customs clearance, repatriation of export earnings, obtaining permits, import order registration and a dearth of banking facilities have created major roadblocks for businesses,” the PMI report reads.
It added that many service provider companies who have the public sector as their client are facing a severe shortage of financial resources because of the government’s failure to fulfill its commitments or because they have to provide services based on contracts made in previous years that are not commensurate with the current rise in prices.
PMI Sub-Indexes
The ICCIMA survey has five main indices to calculate the overall PMI.
According to the report, the “business output” sub-index decreased from 61.37 in the second month of the current fiscal year (April 21-May 21) to 59.5 in the third month of the current fiscal year (May 22-June 21) and declined to 50.82 in the fourth month (June 22-July 22).
The “new orders” sub-index decreased from 55.19 in the second fiscal month to 51.9 in the third month and declined to 47.14 in the fourth month.
The “supplier deliveries” sub-index, which measures how fast deliveries are made, increased from 58.6 in the month ending May 21 to 60.21 in the month ending June 21, but decreased to 56.22 in the month ending July 22.
The “raw materials inventory” sub-index increased from 45.34 in the month ending May 21 to 47.72 in the month ending June 21, but declined to 45.91 in the month ending July 22.
The PMI reading of “employment” sub-index decreased from 54.74 in the month ending May 21 to 52.41 in the month ending June 21 and to 51.17 in the month ending July 22.
To calculate PMI, seven secondary criteria are 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 declined from 92.75 in the month ending May 21 to 86.7 in the month ending June 21 and decreased further to 74.36 in the month ending July 22.
The “warehouse inventory” sub-index increased from 49.63 in the month ending May 21 to 53.42 in the month ending June 21 and to 57.1 in the month ending July 22.
The “exports” sub-index decreased from 50.7 in the second month of the current fiscal to 50.01 in the third month and to 46.96 in the fourth month.
The “prices of manufactured products or services” sub-index decreased from 70.05 in the month ending May 21 to 62.89 in the month ending June 21 and to 62.27 in the month ending July 22.
The “fuel consumption” sub-index decreased from 62.22 in the month ending May 21 to 61.84 in the month ending June 21 and declined to 56.53 in the month ending July 22.
The “sales” sub-index declined from 60.08 in the month ending May 21 to 58.08 in the month ending June 21 and decreased to 46.32 in the month ending July 22.
The sub-index of “business output forecasts for the following month” increased from 43.82 in the month ending May 21 to 50.54 in the month ending June 21, but decreased to 50.18 in the month ending July 22.
The overall PMI decreased from 56.17 in the month ending May 21 to 54.73 in the month ending June 21 and to 50.1 in the month ending July 22.
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.
