PMI shows modest setback in Iran’s industries

Iranian industries are witnessing a modest setback during the third month of the current fiscal year (May 21-June 20) in their indices from purchasing manager surveys compared to the significant improvement that happened during the second month (April 20-May 20).

12 July 2020
ID : 22467
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Iranian industries are witnessing a modest setback during the third month of the current fiscal year (May 21-June 20) in their indices from purchasing manager surveys compared to the significant improvement that happened during the second month (April 20-May 20).

A worker checks headlamps at a production line in a company located in Tehran suburbs.

Iranian industries are witnessing a modest setback during the third month of the current fiscal year (May 21-June 20) in their indices from purchasing manager surveys compared to the significant improvement that happened during the second month (April 20-May 20).

The Purchasing Managers’ Index for the industrial sector settled at 56.80 during the third month from 63.21 in the preceding month, indicating a 10.14% decrease month-on-month.

According to the data released by the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA), the decrease has been due to the change in the “raw materials purchase prices” sub-index which has increased from 86.78 in the month ending May 20 to 92.91 in the month ending June 20. This has resulted in an increase in prices of manufactured products which finally ended in lower sales.

The Overall Economy PMI also retreated from 50.17 to 48.41 registering a 3.5% decrease month-on-month and a tendency towards contraction.

Both the Manufacturing PMI and Overall Economic PMI, however, show that Iran’s economy is going back to the status it had before the outbreak of the coronavirus pandemic.

 

The Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture has been measuring PMI, known by its Farsi acronym Shamekh, in Iran for the past 20 months. 

PMI is an indicator of economic health for 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 when compared with the previous month. A PMI reading under 50 represents a contraction, and a reading at 50 indicates no change. The further PMI moves away from 50, the greater the level of change. 

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.

The index 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. 

Rubber and plastic industries posted the highest PMI with a reading of 65.2 during the month under review while industries classified as "others" registered the lowest PMI reading with 45.3.  

Five Main Sub-Indices
The "production" sub-index for Iran’s industrial sector increased from 20.37 in the first month of the current Iranian year (March 20-April 19) to 71.92 in the second month of the current year (April 20-May 20) but dropped to 58.69 in the third month of the year (May 21-June 20). 

Vehicle and auto parts manufacturing industries recorded the highest PMI in the "production" sub-index last month (65.6) while petroleum and gas products registered the lowest PMI with a reading of 46.3. 

The "new orders" sub-index jumped from 22.03 in the month ending April 19 to 65.85 in the month ending May 20 but fell to 59.62 in the month ending June 20, with the top performing sector being textile industries (78.6).   

The "supplier deliveries" sub-index, which measures how fast deliveries are made, increased from 30.19 in the month ending April 19 to 65.82 in the month ending May 20 but plunged to 58.53 last month.

The highest "supplier deliveries" PMI was posted by wood, paper and furniture with a reading of 65.8 and the lowest was recorded for industries categorized as “others” with a reading of 43.8. 

The "raw material inventory" sub-index climbed from 32.83 in the month ending April 19 to 43.52 in the month ending May 20, but dropped to 42.96 in the month ending June 20. 

Industries classified as “others” registered the lowest PMI reading of 18.8 among all groups in this sub-index, while wood, paper and furniture posted the highest PMI (57.9).

The PMI reading of "employment" sub-index was above the threshold last month. It improved from 42.72 in the month ending April 19 to 56.24 in the month ending May 20 but fell to 55.81 in the month ending June 20.  

Rubber and plastic industries registered the highest PMI reading (69.2) whereas textile industries posted the lowest PMI (50) in this sub-index. 

Seven Secondary Criteria 
To calculate PMI, seven secondary criteria were also surveyed by the center, namely "raw materials purchase prices", "warehouse inventory", "exports", "product price", "fuel consumption", "sales" and "production expectations". 

The "raw materials purchase prices" sub-index increased from 70.95 in the month ending April 19 to 86.78 in the month ending May 20 to 92.91 in the month ending June 20. 

All 12 groups registered PMI readings of higher than 50 for "raw material purchase price" sub-index in the third fiscal month: The highest PMI was recorded for textile industries with a reading of 100 and the lowest for industries categorized as “others” with 87.5. 

The "warehouse inventory" sub-index increased from 42.87 in the month ending April 19 to 51.27 in the month ending May 20, but decreased to 46.75 last month.  

The lowest PMI reading for "warehouse inventory" sub-index was recorded for vehicle and auto parts manufacturing industries (34.4) and the highest was registered for wood, paper and furniture industries with 57.9. 

The "exports" sub-index rose from 32.31 in the month ending April 19 to 46.25 in the month ending May 20 to 47.30 in the month ending June 20. 

PMI reading of "exports" sub-index was the highest for non-metallic mineral industries (56.7) and the lowest for food industries (38.8).  

The "prices of manufactured products" sub-index increased from 49.87 in the month ending April 19 to 66.44 in the month ending May 20 to 72.43 in the month ending June 20. 

Here, machinery and home appliances recorded the highest PMI of 78.8 during the third month of the Iranian year while non-metallic mineral industries posted the lowest PMI reading of 66.7.

The "fuel consumption" sub-index grew from 30.36 in the month ending April 19 to 66.21 in the month ending May 20, but slid to 58.95 last month. 

Rubber and plastic industries registered the highest PMI measured for "fuel consumption" last month (69.2) while petroleum and gas products industries registered the lowest (44.4). 

The "sales" sub-index surged from 18.28 in the first month of the current year to 68.77 in the second month of the current year, but declined to 54.11 in the third month of the current year.  

Clothing and leather industries posted the highest sales PMI here with a reading of 77.3, and petroleum and gas products registered the lowest PMI with a reading of 42.6. 

The "production forecasts for the following month" sub-index fell from 69.11 in the month ending April 19 to 63.12 in the month ending May 20 to 60.86 in the month ending June 20. 

Eleven groups reported PMI reading above 50 for production forecasts for this sub-index, with non-metallic mineral industries registering the highest PMI reading of 86.7 and industries categorized as “others” the lowest PMI reading of 50. 

The overall PMI for industries improved from 28.06 in the month ending April 19 to 63.21 in the Iranian month ending May 20, but dropped to 56.80 in the month ending June 20. 

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.

 

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