Local businesses and producers continue to suffer from fluctuations in foreign exchange rates against the rial as well as a decline in the purchasing power of customers and shortage of raw materials, the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture said in a new report on the Purchasing Managers' Index.
According to a new report, PMI settled at 49.14 in the ninth month of the current Iranian year (Nov. 22-Dec. 21) from 47.39 registered in the previous month, indicating a 1.75-point or 3.69% increase.
The change in PMI suggests that the recession gripping the economy remains in effect, albeit at a less steep pace.
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.
The new report shows all main indicators of the index remain either below or stick around the threshold mark.
“Following the increase in foreign exchange rates [against the rial], companies faced difficulty in supplying their raw materials. The levels of demand and sales have also been in a slump for a third consecutive month. The steep devaluation of the rial and subsequent rise in prices of production inputs have increased pressure on production costs. Considering the decline in sales over the past three months, business owners have been stripped of the ability to plan ahead even in the short term,” the report reads.
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 51.6 in the seventh month of the current fiscal year (Sept. 23-Oct. 22) to 46.24 in the eighth fiscal month (Oct. 23-Nov. 21), but increased to 50.51 in the ninth fiscal month (Nov. 22-Dec. 21).
The “new orders” sub-index decreased from 46.82 in the seventh fiscal month to 43.91 in the eighth month, but grew to 48.47 in the ninth month.
The “supplier deliveries” sub-index, which measures how fast deliveries are made, decreased from 54.78 in the month ending Oct. 22 to 51.73 in the month ending Nov. 21 and to 49.75 in the month ending Dec. 21.
The “raw materials inventory” sub-index increased from 46.28 in the month ending Oct. 22 to 51.26 in the month ending Nov. 21, but decreased to 46.41 in the month ending Dec. 21.
The PMI reading of “employment” sub-index decreased from 52 in the month ending Oct. 22 to 48.88 in the month ending Nov. 21, but grew to 49.32 in the month ending Dec. 21.
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 71.8 in the month ending Oct. 22 to 78.49 in the month ending Nov. 21 and 85.25 in the month ending Dec. 21.
The “warehouse inventory” sub-index decreased from 52.99 in the month ending Oct. 22 to 48.86 in the month ending Nov. 21, but increased to 50.49 in the month ending Dec. 21.
The “exports” sub-index decreased from 47.05 in the seventh month of the current fiscal year to 45.69 in the eighth month, but increased to 50.84 in the ninth month.
The “prices of manufactured products or services” sub-index decreased from 57.45 in the month ending Oct. 22 to 55.47 in the month ending Nov. 21, but grew to 58.58 in the month ending Dec. 21.
The “fuel consumption” sub-index increased from 46.11 in the month ending Oct. 22 to 49.8 in the month ending Nov. 21 and to 67.25 in the month ending Dec. 21.
The “sales” sub-index increased from 42.56 in the month ending Oct. 22 to 48.21 in the month ending Nov. 21, but declined to 48.15 in the month ending Dec. 21.
The sub-index of “business output forecasts for the following month” decreased from 59.58 in the month ending Oct. 22 to 52.62 in the month ending Nov. 21, but increased to 55.01 in the month ending Dec. 21.
The overall PMI decreased from 50.19 in the month ending Oct. 22 to 47.39 in the month ending Nov. 21, but grew to 49.14 in the month ending Dec. 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.
