Iran’s economy contracted for the second month in a row according to new purchasing managers’ index (PMI) data for the Iranian calendar month of Azar (November 22 – December 21). Whole economy PMI rose to 49.15, but remained below the contraction threshold according to PMI data published by the Iran Chamber of Commerce.


The whole economy subindex for new orders improved slightly, rising to 48.47, but remained below 50 for the third month in a row, indicating that weak demand remains a drag on the economy. The small improvement in new orders pushed the output subindex to 50.51, just above the threshold.

Additional pressure rising from the continued devaluation of the rial was also reflected in the PMI report. The subindex for the inventory of raw materials and machinery plummeted to 46.41, falling sharply from 51.26 in the previous month. The subindex for the purchase price of raw materials and machinery surged to 85.25.

The continued economic disruptions are also having an impact on employment. Iran’s economy shed jobs at a faster rate in the month ending December 21. The employment subindex fell to 49.32, remaining below 50 for the second month in a row. The impact on employment is being felt most significantly in the services sector.

Iran’s manufacturing sector is performing better than the wider economy but continues to face headwinds. Manufacturing PMI stood at 51.69, marking a small decline from the previous month. Supply chain disruptions and high raw materials prices poses a challenge for output, which continued to grow, but at a slower rate. The subindex for the purchase price of raw material and machinery jumped to its highest rate over the past seven months and stood at 83.29. The manufacturing subindex for output stood at 53.22.

Manufacturing firms continued to struggle with soft demand and the new orders subindex remained below the threshold of 50 for the third month in a row, registering at 49.10.

As more time passes, Iranian manufacturers are becoming less optimistic. The economic headwinds may not be transitory. The subindex for the expectation of economic activity in the coming month plummeted to its lowest level over the past six months and stood at 58.84.

Business leaders have warned that they will be forced to hike prices soon as production overheads have increased significantly, adding to the inflationary outlook.