PMI Registers Highest Growth

The announcement was made by the Statistics and Economic Analysis Center of the Iran Chamber of Commerce, Industries, Mines and Agriculture. 

PMI for the second month of the current fiscal year (April 21-May 21) stood at 61.39 from 36.38 in the preceding month (March 21-April 20), indicating a 25.01-point or 68.75% rise month-on-month.  

It is eight months now that the statistical center of ICCIMA measures the PMI in Iran, under the Farsi acronym “Shamekh”, according to Financial Tribune.

PMI is an indicator of economic health for manufacturing and services sectors. It aims to provide information about current business conditions to company decision-makers, analysts and purchasing managers.

The headline PMI is a number from 0 to 100, such that over 50 represent an expansion when compared with the previous month. A PMI reading under 50 indicates a contraction and a reading of 50 implies no change. 

The 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 with the importance weight of 30%, raw material inventory levels (10%), production (25%), supplier deliveries (15%) and employment (20%). 

The surveys include 12 questions about business conditions and any changes, whether it is improving, no changes or deteriorating. 

At present, ICCIMA publishes reports only on Iran’s industrial sector and its 12 subset fields. It plans to survey services and agriculture sectors in the near future.  

Five Main Indices

The "production" sub-index for Iran’s industrial sector decreased from 57.23 in the final month of the last Iranian year (ended March 20, 2019) to 23.88 in the following, but jumped to 69.97 in the second Iranian month—the highest month-on-month growth among the five main indices under review. 

All industries recorded PMI readings above 50, except for “oil, natural gas and refineries” with a reading of 47.9. 

The "new orders" sub-index fell in the three consecutive months from 66.81 to 35.08, before climbing to 66.31 in the three consecutive months with the top performing categories for the second fiscal month being “other industries” (87.5), “ plastic and rubber production”(78.9) and “vehicle and auto parts manufacturing” (77.6).  

The "supplier deliveries" sub-index, which measures how fast deliveries are made, slid from 50.52 to 47.17, before increasing to 60.25. The highest PMI was posted by “metal industries” with a reading of 64.8 and the lowest was recorded for “oil, natural gas and refineries” with a reading of 45.8.

The "raw materials inventory levels" sub-index slipped from 39.96 to 34.32, but rose to 43.05 in the month ending May 21. Nine out of 12 industries posted PMI readings below 50 in the second month of the current Iranian year. 

“Textile industries” registered the lowest PMI (20.8) among all groups.

The PMI reading of “employment” sub-index edged above 50 last month: it had decreased from 47.17 to 46.87, but improved to 53.3 in the second fiscal month. “Plastic and rubber production” industry registered the highest PMI (68.4) whereas “non-metallic minerals industries” posted the lowest PMI (45.7).

Seven Secondary Criteria

To calculate PMI, seven secondary criteria were also surveyed by the center, namely raw materials purchase prices, warehouse inventory level, exports, prices of products, fuel consumption, sales level and production expectations. 

The “raw materials purchase prices” sub-index increased from 81.67 to 89.48, but slid to 89.45 in the month ending May 21. 

All industries registered PMI readings of higher than 50 in the second fiscal month, suggesting that the prices of raw materials needed by all industries increased. Raw materials’ purchase price index of “chemical industries” was the highest of all industries (95.8) and those of “other industries” was the lowest (75) during the month under review.

The “warehouse inventory level” sub-index rose from 39.10 to 45.55, before settling at 49.48 in the month ending 21. The lowest PMI sub-index was recorded for “machinery and home appliances” group (32.3).

The “exports” sub-index decreased from 49.33 to 37.88, but grew to 48.10. 

The decline in exports of “food industries” was the most significant among all groups in the second fiscal month: the industry’s “exports” sub-index stood at 35.1. 

“Clothing and leather” industry posted the highest exports PMI (60) in the month ending May 21. 

The “prices of manufactured products” sub-index increased from 62.83 to 69.95, before rising further to 72.63. 

Of the 12 industries, “oil, natural gas and refineries” group recorded the highest PMI of 85.4 during the second month of the Iranian year. 

The “fuel consumption” sub-index fell from 55.74 to 33.72, but rose to 65.95 in the following month. “Other industries” registered the highest PMI (87.5) whereas “textile industries” posted the lowest PMI (50), suggesting that the latter group had the lowest fuel consumption by May 21. 

The "sales level” sub-index plunged from 63.65 to 24.74, but climbed to 66.85 in the second fiscal month. The “clothing and leather” industry posted the highest PMI with 80 while “oil, natural gas and refineries” recorded the lowest PMI reading of 39.6. 

The “production expectations for the next month” sub-index surged from 32.40 to 68.80, but dropped to 59.43 in the following month.  

Among the 12 groups, “non-metallic minerals industries” registered the highest PMI of 65.2 in the second fiscal month while “textile industries” recorded the lowest PMI of 20.8.

The overall PMI index for industries declined from 55.36 to 36.38, but improved to 61.39 in the month ending May 21.

PMI, among the most precise indicators showcasing a country’s economic condition, was first devised by the Institute for Supply Management in the US in 1948. It is calculated as (P1 * 1) + (P2 * 0.5) + (P3 * 0) where P1 is percentage of answers reporting an improvement, P2 is percentage of answers reporting no change, and P3 is percentage of answers reporting a deterioration.