EghtesadOnline: The latest industrial purchasing managers’ index (PMI) survey indicates that economic players are still optimistic about the prospects of domestic production.
The Statistics and Economic Analysis Center of the Iran Chamber of Commerce, Industries, Mines and Agriculture, however, added that the overall PMI is slightly above the neutral level of 50.
PMI for the fourth month of the current fiscal year (June 22-July 22) stood at 50.07 from 50.66 in the preceding month (May 22-June 21), indicating a 0.59-point or 1.1% decline month-on-month.
It is 10 months now that the center is measuring PMI in Iran, under the Farsi acronym “Shamekh”. 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, Financial Tribune reported.
The headline PMI is a number from 0 to 100, such that over 50 represents an expansion when compared with the previous month. A PMI reading under 50 indicates a contraction and a reading of 50 implies no 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 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 agricultural sectors in the near future.
Chemical industries posted the highest PMI with a reading of 53.7 during the month under review while "textile industries" registered the lowest PMI reading with 40.6.
Five Main Sub-Indices
The "production" sub-index for Iran’s industrial sector fell from 69.97 in the second month of the current Iranian year (ended May 21) to 50.20 in the following and then to 48.67 in the fourth Iranian month.
“Textile industries” recorded the lowest PMI of the “production” sub-index last month (38.5) while “non-metallic minerals industries” group had the highest PMI with a reading of 61.9.
The “new orders” sub-index dipped to 45.03 in the fourth month from 47.94 in the previous month with the top performing industry for the fourth fiscal month being “plastic and rubber production” (60).
The “supplier deliveries” sub-index, which measures how fast deliveries are made, decreased from 60.25 in the second Iranian month to 58.69 in the third month, before rebounding to 59.39 in the fourth month of the Iranian year.
The highest “supplier deliveries” PMI was posted by “clothing and leather” with a reading of 75 and the lowest was recorded for “textile” and “oil, natural gas and refineries” industries with a reading of 50.
The "raw materials inventory levels" sub-index slipped from 43.05 in the month ending May 21 to 42.36 in the month ending June 21, before climbing to 45.8 in the month ending July 22.
Ten out of 12 industries posted PMI readings below 50 in the fourth month of the current Iranian year. Industries included in “other” registered the lowest PMI (35) among all groups.
The PMI reading of “employment” sub-index stuck above 50 last month: It increased from 53.30 in the second fiscal month to 53.43 in the third fiscal month and 54.53 in the fourth month. “Machinery and home appliances” industry registered the highest PMI (65.2) whereas “textile industries” posted the lowest PMI (46.2).
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 decreased from 89.45 to 75.97 in the month ending June 21 to 60.46 in the month ending July 22.
All industries registered PMI readings of higher than 50 in the fourth fiscal month, except for “metal industries” with a reading of 45.3, suggesting that the prices of raw materials needed by all industries increased.
Raw materials’ purchase price index of “non-metallic minerals industries” was the highest of all industries (73.8) during the month under review.
The “warehouse inventory level” sub-index rose from 49.48 in the month ending May 21 to 51.89 in the month ending June 21 to 54.36 in the month ending July 22. The lowest PMI sub-index was recorded for “vehicle and auto parts manufacturing” group (42.9) and the highest was registered for “clothing and leather” with 71.9.
The “exports” sub-index decreased from 48.10 to 46.84 before reaching 46.41 in the fourth Iranian year.
All 12 categories registered PMI readings of the threshold 50 or below during the month under review. The decline in exports of “clothing and leather” was the most significant among all groups in the fourth fiscal month, while the “industrial exports” sub-index stood at 34.4.
The “prices of manufactured products” sub-index decreased from 72.63 to 60.11 to 50.07 in the fourth fiscal month. Of the 12 industries, “textile industries” recorded the lowest PMI of 38.5 during the fourth month of the Iranian year.
The “fuel consumption” sub-index slid from 65.95 in the month ending May 21 to 58.74 in the following month to 54.96 in the month ending July 22. “Vehicle and auto parts manufacturing” registered the highest PMI (65.7) whereas “wood, paper and furniture” posted the lowest PMI (40.9), indicating that the latter group had the lowest fuel consumption by July 22.
The “sales level” sub-index dropped from 66.85 in the second Iranian month to 47.36 in the third to 43.45 in the fourth. The “vehicle and auto parts manufacturing” industry posted the highest PMI with 55.7 while “plastic and rubber production” recorded the lowest PMI reading of 30.
The “production forecasts for the next month” sub-index edged down from 59.43 in the month ending May 21 to 56.84 in the month ending June 21, but rose to 58.06 in the month ending July 22.
Among the 12 groups, “non-metallic minerals industries” registered the highest PMI of 71.4 in the fourth fiscal month while industries categorized within “others” recorded the lowest PMI of 40.
The overall PMI for industries fell from 61.39 in the month ending May 21 to 50.66 in the month ending June 21 to 50.07 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 USA 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.