First PMI on Iran's Overall Economy Exposes Recession

(Tuesday, January 14, 2020) 10:27

Purchasing Managers Index in the ninth month of the current fiscal year (Nov. 22-Dec. 21) settled at 48.22, indicating that Iran’s economy is in recession, according to the Statistics and Economic Analysis Center of the Iran Chamber of Commerce, Industries, Mines and Agriculture.

The center has measured PMI, known by its Farsi acronym “Shamekh”, for the country’s economy as a whole for the first time by reviewing its performance in the last three months. 

The PMI for the overall economy dropped from 47.23 in the month ending Oct. 22 to 42.27 in the month ending Nov. 21, but improved to 48.22 in the month ending Dec. 21.

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 contraction and a reading of 50 implies no change. 

PMI is an index of the prevailing direction of economic trends, which provides information about business conditions to company decision-makers, analysts and purchasing managers. 

According to the report, the "business output" sub-index decreased from 47.45 in the seventh Iranian month that ended on Oct. 22 to 41.49 in the eighth month (Oct. 23-Nov. 21) but climbed to 49.61 last month (Nov. 22-Dec. 21).  

The “new orders” sub-index decreased from 42.26 in the seventh month to 40.50 in the eighth month, but increased to 45.70 in the ninth month.    

The “supplier deliveries” sub-index, which measures how fast deliveries are made, decreased from 55.37 in the seventh month to 46.45 in the eighth month, but rebounded to 54.76 in the ninth month. 

The “raw materials inventory levels” sub-index decreased from 46.69 in the month leading to Oct. 22 to 38.05 in the month ending Nov. 21, but improved to 41.37 in the month ending Dec. 21. 

The PMI reading of “employment” sub-index fell from 48.57 in the seventh month to 44.88 in the eighth month, but improved to 48.79 in the ninth month. 

The “warehouse inventory level” sub-index decreased from 49.35 in the month ending Oct. 22 to 48.13 and 48.05 in the subsequent months.  

The “exports” sub-index decreased from 44.95 in the seventh fiscal month to 43.42 in the eighth month, but rebounded to 45.09 in the month ending Dec. 21. 

The “prices of manufactured products or services” sub-index increased incrementally from 45.17 in the seventh month to 53.55 and 55.74 in the next two months. 

The “fuel consumption” sub-index also grew from 56.83 in the month ending Oct. 22 to 59.74 and 61.41 in the following two months. 

The “sales level” sub-index declined from 43.22 in the seventh month to 39.33 in the eighth month, but improved to 46.77 in the ninth month. 

“Business output forecasts for the following month” sub-index decreased from 57.59 in the month ending Oct. 22 to 47.61 in the month ending Nov. 21, but rebounded to 49.98 in the month ending Dec. 21. 

 

 

Improvement in Industrial PMI

The Statistics and Economic Analysis Center of the Iran Chamber of Commerce, Industries, Mines and Agriculture has been publishing reports on the country’s industrial PMI for the past 15 months.

The industrial PMI for the ninth month of the current fiscal year (Nov. 22-Dec. 21) settled at 56.93 from 51.13 in the preceding month, indicating a 5.8-point or 11.34% increase month-on-month. 

It 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. 

“Vehicle and auto parts manufacturing” industry posted the highest PMI with a reading of 67 during the month under review while “food industries” registered the lowest PMI of 46.3. 

The "production" sub-index for Iran’s industrial sector increased from 49.29 in the seventh fiscal month that ended on Oct. 22 to 49.60 in the eighth Iranian month (Oct. 23-Nov. 21) and to 59.56 last month (Nov. 22-Dec. 21).  

Industries categorized under “other” recorded the lowest PMI of the “production” sub-index last month (38.9) while “vehicle and auto parts manufacturing” had the highest PMI with a reading of 72.7. 

The “new orders” sub-index increased from 48.97 in the eighth month to 55.89 in the ninth month, while the top performing industry for the eighth fiscal month was “vehicle and auto parts manufacturing” at 75.8.    

The “supplier deliveries” sub-index, which measures how fast deliveries are made, decreased from 60.65 in the seventh month to 59.38 in the eighth month, but rebounded to 62.33 in the ninth month. 

The highest “supplier deliveries” PMI was posted by “textile industries” with a reading of 76.9 and the lowest was recorded for “clothing and leather” with a reading of 50. 

The “raw materials inventory levels” sub-index decreased from 48.87 in the month leading to Oct. 22 to 43.58 in the month ending Nov. 21, but improved to 48.61 in the month ending Dec. 21. 

Five out of 12 industries posted PMI readings below 50 for “raw materials inventory levels” last month. “Non-metallic minerals industries” registered the lowest PMI (39.1) among all groups while “oil and gas industries” posted the highest PMI (63.5).

The PMI reading of “employment” sub-index once again stuck above the threshold level last month. It improved from 53.86 in the eighth month to 55.32 in the ninth month.  

“Rubber and plastic industries” industry registered the highest PMI (67.9) whereas “food industries” posted the lowest PMI (42.4).  

To calculate the industrial 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 46.92 in the month ending Oct. 22 to 63.79 in the month ending Nov. 21 to 76.20 in the month ending Dec. 21. 

All 12 groups posted PMI readings of higher than 50 for “raw materials’ purchase price” sub-index in the ninth fiscal month, but the highest PMI was recorded for “metal industries” with a reading of 87.5.

The “warehouse inventory level” sub-index decreased from 56.77 in the month ending Oct. 22 to 51.94 in the month ending Nov. 21 to 49.78 in the month ending Dec. 21.  

The lowest PMI sub-index was recorded for “metal industries” (42.5) and the highest was registered for “non-metallic minerals industries” with 65.2.  

The “exports” sub-index increased from 46.27 in the month ending Nov. 21 to 47.19 in the month ending Dec. 21. 

PMI reading of exports sub-index was the lowest for “clothing and leather” (42.3) and highest for “oil and gas industries” (51.9).  

The “prices of manufactured products” sub-index increased from 40.59 in the seventh month to 45.13 in the eighth month to 53.22 in the ninth month. 

“Rubber and plastic industries” recorded the lowest PMI of 42.9 and “clothing and leather” the highest PMI of 57.7 during the ninth month of the Iranian year. 

The “fuel consumption” sub-index grew incrementally from 52.19 in the month ending Oct. 22 to 58.91 and 62.70 in the following two months. Two groups of “vehicle and auto parts manufacturing” and “wood, paper and furniture” registered the highest PMI measured for fuel consumption last month (72.7).  

The “sales level” sub-index improved from 44.02 in the seventh month to 45.93 in the eighth month to 55.53 in the ninth month. “Vehicle and auto parts manufacturing” posted the highest PMI with a reading of 77.3 and industries categorized as “other” registered the lowest PMI with a reading of 27.8. 

“Production forecasts for the following month” sub-index decreased from 62.32 in the month ending Oct. 22 to 59.71 in the month ending Nov. 21, but rebounded to 61.67 in the month ending Dec. 21. 

Among the 12 groups, “clothing and leather” registered the highest PMI reading of 73.1 in the ninth fiscal month while “oil and gas industries” recorded the lowest PMI reading of 51.9.