Iran PMI Report - Mordad 1400 (July 23 - August 22)
A Summer to Forget
Iran’s economy edged back towards growth in the calendar month of Mordad (July 23 – August 22), according to new purchasing managers’ index (PMI) data published by the Iran Chamber of Commerce.
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Whole economy PMI rose to 46.59 from 44.64 in the previous month. But the outlook for the economy remained negative. Output fell sharply, with the sub-index falling to 40.41, an unusually low level for this time of year, despite summer holidays. Shutdowns related to COVID-19 were cited as a cause for the reduced output. Demand also remains weak with the sub-index for new orders registering a small increase to 43.89. Demand has been hit by continued economic uncertainty as the Raisi administration has yet to assert itself in economic planning. This uncertainty is reflected in part in the recent weakening of the rial.
The manufacturing sector, long the resource of Iran’s economic resilience, also struggled. Manufacturing PMI recorded a slight increase to 45.24. Again, declining output explains the sector’s poor performance. A combination of summer holidays at major factories and the COVID-19 related business shutdowns led hit production. Increased volatility in foreign exchange markets has led to cost pressures and constrained supply of raw materials. The sub-index for raw materials inventory fell to 42.18, the lowest level in the past 10 months. The sub-index for purchase price of raw materials and machinery jumped to 82.53 while the sub-index for the price of finished goods reached 60.01—the highest rates over the past four months.
However, respondents to the Iran Chamber of Commerce’s survey believe that the worst may be over. The sub-index for the expectations of economic activity in the coming month reached 65.98, the highest level so far this summer.
Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
Iran PMI Report - Tir 1400 (June 22 - July 22)
Blackouts Compounded by COVID-19
The latest Purchasing Managers’ Index (PMI) report published by the Iran Chamber of Commerce, covering the Iranian calendar month of Tir (June 22 – July 22), made clear the economic consequences of continued blackouts in Iran and a rising fifth wave of COVID-19 cases.
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Whole economy PMI fell to 44.62 from 51.27 in the prior month, meaning that the Iranian economy has returned to contraction, ending a 5 month period of growth.
The Iran Chamber of Commerce described the decline as a “sharp fall,” and pointed to COVID-19 related restrictions, recurring blackouts, returning weakness in Iran’s currency, and political uncertainty following the outcome of the Iranian presidential election. The whole economy sub-index fell to 44.93 in the face of reduced demand for goods and services. The new orders sub-index plummeted to 33.98, the second lowest rate recorded since the inception of the whole economy PMI reports.
The weakening of the Iranian rial over the month pushed the sub-index for the price of raw materials and machinery to 84.02, the highest figure in nine months.
One of the few bright spots was in the sub-index for employment, which saw a small increase to 54.87, as jobs continued to be added in the services and agricultural sectors.
Manufacturing PMI fell to 43.19, down from 54.21 in the previous month. The outlook for output, new orders, and raw materials inventories turned negative. Most concerning for the wider economy, the employment sub-index dropped to 47.86, breaking a 15-month streak during which the manufacturing sector added jobs.
While power outages had become less frequent, the COVID-19 caseload continued to mount towards the end of Tir. With a lockdown now in force, the outlook for Iran’s economy will remain negative for the near-term unless the government manages to reinstate the stability that had enabled Iran’s economic recovery in the first half of the year.
Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
Iran PMI Report - Khordad 1400 (May 22 - June 21)
Blackouts Hamper Growth
Recurring blackouts and constraints in the supply of raw materials hampered business activity in Iran during the calendar month of Khordad (May 22 - June 21), according purchasing managers’ index (PMI) data released by the Iran Chamber of Commerce.
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Given new headwinds, whole economy PMI fell to 51.27 from 53.78 in the previous month. While the economy is still growing, the PMI data indicates a fall in new orders, continued increases in the price of raw materials, and a drop in output likely related to recurring power cuts have hampered economic activity. The whole economy sub-index for output fell by over 6 points to 52.64. The whole economy sub-index for raw materials inventory fell to 45.73, its lowest rate in the past seven months.
While remaining in a growth phase, the manufacturing sector likewise saw a steep fall in economic activity. Manufacturing sector PMI fell nearly 9 points to 54.21. The sub-index for output fell to 53.64 from 68.68 in the previous month. Researchers at the Iran Chamber of Commerce blame the power cuts for interrupting output at manufacturing facilities.
The raw materials and machinery inventory sub-index declined to 47.52 from 53.59 a month earlier. Researchers at the Iran Chamber of Commerce cited import bottlenecks and an increase in the price of hard currency in Iran’s FX market as sources of pressure on raw materials inventories.
Despite the blackouts and supply constraints, businesses remain optimistic about the state of the economy. The whole economy sub-index for expectations of economic activity reached 63.78. Optimism is also reflected in the employment-related data. For the seventh straight month, the Iran’s manufacturing sector added jobs, with the employment sub-index at 55.93.
Whether this optimism is warranted depends on an end to the blackouts and no further deterioration in the availability and price of raw materials.
Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
Iran PMI Report - Ordibehesht 1400 (April 21 - May 21)
Clouds on the Horizon
Iran’s business climate continued to show sings of recovery during the calendar month of Ordibehesht (April 21 – May 21) according to Purchasing Managers’ Index (PMI) data published by the Iran Chamber of Commerce.
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Following the slowdown in the Iranian calendar month of Farvardin (March 21 – April 20), during which Whole Economy PMI fell to 39.65 due to the Nowruz holidays and lingering impact of COVID-19, the index reached 53.84 in Ordibehesht, the second highest level since the Iran Chamber of Commerce began tracking Whole Economy PMI. The sub-index for output reached 58.64, the highest level to date.
However, the sub-index for new orders declined to 49.80 in a sign of uncertainty around the impact of Iran’s presidential election, the fate of the nuclear negotiations, and the continued stability of Iran’s currency. The sub-index for raw materials prices was 76.25, indicating that production costs continue to rise. The sub-index for raw materials and machinery inventory stood at 49.49, registering a slight decline compared to the prior month. High production costs and continued inflation will continue to erode demand, which could slow the economic recovery in the coming months.
Strong performance in the manufacturing sector saw the whole economy sub-index for employment rise to 52.05, the highest level on record. Manufacturing PMI jumped to 63.00 while the new orders sub-index for the manufacturing sector rose to 61.81.
The sub-index for raw materials and machinery inventory reached 53.59, the highest rate recorded since the PMI report was first issued 32 months ago. The manufacturing sector continues to add jobs, with the sub-index for employment reaching 59.66.
At the time of the survey, manufactures were optimistic about further improvements in the business climate. The sub-index for expectations of economic activity was a healthy 60.66.
But the recently slowdown in the Vienna negotiations and the difficulties with electricity supply that have led to significant blackouts in Iran where highlighted as future risks by researchers at the Iran Chamber of Commerce which will likely be reflected in the forthcoming PMI data.
Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
PMI Report - Esfand 1399 (February 19 - March 20)
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Ending the Year on a High
The Iranian economy ended the year 1399 on a high according to Purchasing Managers’ Index (PMI) data published by the Iran Chamber of Commerce. Whole Economy PMI reached 54.73 while the sub-index for output rose to 58.39, the highest level registered to date.
The strong economic performance is related to higher consumer demand in the lead-up to the Nowruz holiday. The sub-index for sales jumped nearly 7 points to 60.30.
Manufacturing activity was also strong with Manufacturing PMI rising to 57.29 despite a small drop in output. The sub-index for output fell to 56.15 from 59.58 in the prior month. Manufacturers face continued challenges in managing inventories. The sub-index for raw materials and machinery inventory dropped to 49.42. Last month, the sub-index had surpassed the threshold of 50 for the first time in 29 months. The sub-index for raw materials purchases price also rose to 79.98.
Manufacturers are preparing for the seasonal lull in activity as the country moves into the long Norwuz holiday. The sub-index for expectations of economic activity in the coming month was 44.57. A continued rise in COVID-19 cases and the start of the Ramadan period are also expected to depress economic activity.
Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
PMI Report - Bahman 1399 (January 20 - February 18)
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A Turning Point for Iran’s Economy?
Iran’s economy has returned to growth according to the latest Purchasing Managers’ Index data published by the Iran chamber of commerce. Whole Economy PMI reached 53.73 during the Iranian calendar month of Bahman (January 20 – February 18) — the highest level since the index was launched 17 months ago.
Output surged as the country gears up for the Nowruz holiday—a period of the year when consumption typically increases. The Whole Economy PMI sub-index for output reached 56.71—another record high for the index. Output rose across records, including, agriculture, services, industries, and housing.
But growing demand was not limited to domestic buyers. The Whole Economy sub-index for exports rose to 47.56, a significant increase from 43.46 in the prior month. This has been attributed to an increase in the export of manufactured goods. Customs data indicates that exports rose $184 million over the previous month’s total.
Looking to the economy at large, raw materials inventories continue to be the primary drag on growth. The relevant sub-index marked a small decline to reach 48.26 while the sub-index for raw material purchase prices rose to 79.92.
But in the manufacturing sector, a more positive outcome was registered. The Manufacturing PMI sub-index for raw materials inventory exceeded 50 for the first time since the index was launched 29 months ago. Manufacturers continue to face challenges in this area, but the small reprieve over the last few months has helped push the sector back into growth. Manufacturing PMI reached reached 58.34, its highest rate over the past nine months.
Growing demand at home and increased exports point to better prospects for Iran’s factories. New orders poured in during the Iranian calendar month of Bahman. The sub-index for new orders reached 60.03. The Iran Chamber of Commerce attributes this result to increased demand related to the Nowruz holiday, but also the diminishing impact of COVID-19 and its related restrictions on Iran’s economy.
The Manufacturing PMI sub-index for exports exceeded 50 for the first in 29 months, pointing to the positive dynamics for those Iranian manufacturers that have been able to maintain cost-efficient supply chains while taking advantage of Iran’s devalued currency to offer their products at competitive prices to foreign buyers.
Iranian economic actors are moving into the new year with greater confidence. The Whole Economy PMI sub-index for expectations of economy activity was 58.92, indicating that business expect the favourable conditions to persist.
Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
PMI Report - Dey 1399 (December 21 - January 19)
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Iran’s Economy is Gearing-Up
While Iran’s manufacturing sector remain in contraction, new Purchasing Managers’ Index (PMI) data published by the Iran Chamber of Commerce points to Iran’s strongest overall economic performance in eight months. Whole Economy PMI rose 1.06 points from the previous month to reach 48.83 in the Iranian calendar month of Dey (December 21 - January 19).
While the economy remains in contraction, the sub-index for output exceeded 50 for only the third time in the 16 month period during which PMI data for the whole economy has been collected. The only previous months in which output was in expansion were the two months immediately following the beginning of the Iranian calendar year, when Iran was rebounding from the most acute point of the pandemic-induced economic crisis.
The Iran Chamber of Commerce also noted increased activity in the housing sector, in a sign that confidence is building in Iran’s economic recovery.
The Whole Economy sub-index for new orders showed a small decline, falling 0.12 points to 43.99. This may reflect some companies delaying purchases given expectations that Iran’s currency will appreciate in the coming months, leading to lower prices.
Meanwhile, in the manufacturing sector, PMI rose to half a point to 49.79—just shy of a return to expansion. The sector continued to be held back by weak demand, with the sub-index for new orders at 44.80. Output has fallen in line, with the sub-index dropping to 48.65 from 50.75 a month earlier.
With Iranian fiscal year coming to an end in March, manufacturers expect a surge in activity. Companies appear to be boosting staff in preparation. The sub-index for employment rose nearly 3 points to 53.94.
The sub-index for raw materials purchase price declined to 73.72, marking the fourth month of decline. This means that the prices of raw materials are increasing at a slower pace—a fact support by data on inflation.
In a sign of confidence, the Whole Economy economy sub-index for expectations of economic activity in the coming month surged to 60.95, its highest rate since the start of data collection. The same measure in the manufacturing PMI reached 64.74, the highest level in the past nine months. The Iran Chamber of Commerce notes, “Considering the outcome of the US election many businesses expect sanctions to be lifted.”
Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
PMI Report - Azar 1399 (November 21 - December 20)
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Demand-Side Underwhelms, Supply-Side Improves
New purchasing managers’ index data compiled by the Iran Chamber of Commerce indicates that Iran’s economic recovery is continuing and economic actors are increasingly confident about short-term prospects.
In Iranian calendar month of Azar (November 21 – December 20), Whole Economy PMI rose 2.07 points from the previous month to reach 47.77. Meanwhile, Manufacturing PMI rose 1.67 points to reach 49.30, registering just below a return to expansion. Despite improvements in both indicators, the economy remains stagnant, but there are positive signs in both the wider economy and the manufacturing sector.
The Whole Economy PMI sub-index for employment reached 51.30, its highest rate since the start of the Iranian calendar year. This was just the second month this year that the sub-index was above 50, indicating that the economy added jobs.
Additionally, the sub-index for the purchase price of raw materials declined to 76.64, continuing a positive trend linked to the greater stability in the value of the Iranian rial over the last few months and a decline in the monthly inflation rate. With a sharp rise of 6.29 points over the previous month, the sub-index for raw materials inventories reach 46.13, the highest level in over a year.
Economic actors report continued to believe in Iran’s economic recovery, with the Whole Economy PMI sub-index for expectations for economic activity in the coming month reaching 56.38, the highest level in seven months.
While the manufacturing sector remained in contraction in Azar, the primary cause appears to have been still depressed demand, rather than the supply chain vulnerabilities that were responsible for the downturn in the manufacturing sector earlier in the year.
The Manufacturing PMI sub-index fell to 43.51, indicating the second month in a row of weak demand. But should demand pick-up, manufacturers will be in position to fulfill orders. The sub-index for raw materials inventory reached 48.92, one of its highest rates over the past two years. This suggests the supply-chain bottlenecks and the high input prices are easing.
Meanwhile, the manufacturing sector added jobs, with the sub-index for employment rising from 49.43 in the previous month to 51. Confidence in the sector remains high—the sub-index measuring expectations for economic activity in the coming month reached 58.22. Should inflation continue to ease thereby boosting consumption, the manufacturing sector’s recovery will likely consolidate.
Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
PMI Report - Aban 1399 (October 22 - November 20)
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Iran’s Third Wave Comes at a Cost
Iran’s business climate showed signs of improvement in the Iranian calendar month of Aban (October 22 – November 20), with a strengthening currency giving Iranian firms cause for optimism. But Iran’s third wave of COVID-19 infections depressed demand for goods and services, pushing the manufacturing sector into contraction. A nationwide lockdown that began on November 20 will likely see the economic impacts extend into the Iranian calendar month of Azar, which began on November 21.
The improvement in some key macroeconomic indicators saw Whole Economy PMI reach 45.70, an increase 1.23 points from the previous month, on the back of a long-awaited easing in the cost of raw materials and machinery. The sub-index for the price of raw materials declined to 83.09, while the sub-index for the price of final goods and services fell to 64.71, down from 77.31 in the prior month. This data corroborates slowing inflation. Monthly inflation in Aban was 5.2 percent, down from 7 percent in the previous month.
The outcome of the US election and interventions by Iran’s central bank saw FX markets stabilize over the course of Aban, and while the economy continues to contract, the Iran Chamber of Commerce reports that Iranian firms expect the business climate to continue to improve in the comings months. The sub-index for expectations of economy activity in the coming month rose to 50.13, up from 41.15 in the prior month.
Despite the slight improvement in the overall economic outlook, the manufacturing sector stumbled in the month of Aban. Manufacturing PMI slid into contraction, falling to 47.63 from 52.22 in the previous month. The pandemic-related impact on demand is similar in scale to the seasonal slowdown seen in August, and manufacturing PMI fell to roughly the same level. Demand may also have fallen as consumers held-off on purchases in order to take advantage of the expected fall in prices predicted by the strengthening of the rial.
The sub-index for output fell to 47.94 from 52.16 in the previous month. But more promisingly, the constraint on output does not appear to have been related to ongoing issues around access to raw materials and intermediate goods. The Manufacturing PMI sub-index for raw materials inventory rebounded to 42.49 from 37.46 in the prior month. The sub-index for raw materials prices fell from 94.82 to 79.90, a marked improvement that should boost the sector if sustained. Despite the ongoing COVID-19 crisis, manufacturing firms reported positive expectations future activity, with the relevant sub-index registering at 51.59, down from 57.63 in the prior month.
Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
PMI Report - Mehr 1399 (September 22 - October 21)
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Is Iran’s Economy at a Turning Point?
The Iranian calendar month of Mehr (September 22 - October 21) saw the highest level of monthly inflation in two years, with the Consumer Price Index rising 7 percent following several weeks of significant volatility in foreign exchange markets. As detailed in the latest Purchasing Managers Index report published by the Iran Chamber of Commerce, this volatility had a directly impact on overall economic activity in Iran.
Whole Economy PMI declined 2.39 points to 44.47. Rising prices have hit the services sector as households cut back on consumption. The seasonal slowdown in agricultural activity also contributed to the weaker performance for the economy at large.
Iran’s manufacturing sector continued to experience growth, with Manufacturing PMI registering at 52.22. There were improvements across the sub-indices for output, the speed of supplier deliveries, new orders, and employment. However, the sub-index for raw materials inventory fell by a significant 3.55 points to reach 37.46, while the sub-index for raw materials prices reached 94.82, the highest level in the two years that this data has been collected. Notably, the sub-index for raw materials inventory has not exceeded 50 at any point in the last two years. It is the only major sub-index to demonstrate this kind of sustained weakness.
Iranian manufacturing firms are also reporting higher prices for manufactured goods, indicating that these price increases are being passed-on to customers, further increasing inflation.
The Mehr report marked the final set of PMI data prior to the US election. Companies surveyed for the report by the Iran Chamber of Commerce relayed that the election might be expected to have a positive impact on business activity in Iran. Joe Biden’s victory already appears to have had a positive impact on foreign exchange markets. Should inflation slow in the coming months, we can expect the recovery to pick up, first in the manufacturing sector and subsequently in the wider Iranian economy.
Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
PMI Report - Shahrivar 1399 (August 22 - September 21)
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Iran Passes Late Summer Doldrums but Bottlenecks Growing Worse
Iran’s manufacturing sector returned to expansion in the Iranian calendar month of Shahrivar (August 22 - September 21), moving past the late summer doldrums. But the wider economy remains in contraction as firms face worsening bottlenecks for the supply of raw materials.
The latest Purchasing Managers’ Index (PMI) report published by the Iran Chamber of Commerce indicates that Whole Economy PMI rose 0.43 points to reach 46.86. A PMI below 50 indicates economic contraction. Despite the nominal improvement in overall economic performance, the Whole Economy sub-index for raw material inventory fell to 35.64, down from 40.24 a month earlier. Part of the bottleneck is attributable to a slowdown in deliveries. The Whole Economy sub-index for the speed of supplier deliveries fell to 48.50 from 53.28.
The bottleneck continues to put upward pressure on prices. The Whole Economy sub-index for raw materials prices was 88.75, which the sub-index for prices of manufactured goods rose to 72.33. Pessimism is growing about when the bottleneck will ease and firms expect worse economic performance next month. The Whole Economy sub-index for expectations of economic output in the coming month falling significantly, down from 51.55 to 44.51.
As has been the case over the last 18 months, Iran’s manufacturing sector was again a bright spot for the economy, returning to expansion after the late summer blip. Manufacturing PMI rose 6.47 points to 54.53. Notable improvements could be seen in the sub-indexes for output (56.17), new orders (57.48), speed of supplier deliveries (56.72), and employment (53.17). But the trend around prices continues to be negative, with the sub-index for raw materials prices rising from 88.63 to 93.07.
Chinese exports to Iran have stabilized in recent months, but Iranian firms continue to report issues in their supply chains. This suggests that challenges in making timely payments may be responsible for the bottleneck as firms struggle to acquire the foreign currency needed to make payments—a likely consequences of turbulence in the foreign exchange rate.
Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
PMI Report - Mordad 1399 (July 22 - August 21)
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High Prices and Weak Demand See Blip in Manufacturing-Led Recovery
Continued shortages of raw materials and depressed consumer demand led to a continuation of Iran’s economic contraction in the month of Iranian calendar month of Mordad 1399 (July 22 – August 21).
The latest Purchasing Managers’ Index (PMI) report prepared by the Iran Chamber of Commerce shows Whole Economy PMI rising 0.96 points to reach 46.43.
There are signs that the supply bottlenecks may be easing. The Whole Economy sub-index for raw materials inventory rose from 35.29 to 40.24. However, even as raw materials and inputs are proving easier to source, prices remain high. The comibination of high prices and weak demand have led new orders to fall to their lowest level in four months, with the Whole Economy sub-index falling from 44.39 to 41.53.
Despite the small improvement in the state of the overall economy, Iranian manufactures continue to face headwinds, with the sector slipping into contraction for the first time since April. Manufacturing PMI fell sharply from 55.25 to 48.06.
Part of this decline can be explained by the summer holidays imposed by many manufactures, such as the 10-day pause in production at Iran Khodro and SAIPA, the country’s two largest automakers. But it also reflects the impact of weak demand and high prices. The Manufacturing PMI sub-index for new orders plunged to 44.23 from 58.85 a month earlier.
However, manufacturers appear optimistic that the month of Mordad was a temporary blip in sector’s recovery. The Manufacturing PMI sub-index measuring expectations of economic output in the coming month rose from 51.37 to 58.62.
Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
PMI Report - Tir 1399 (June 21 - July 21)
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Virus Second Wave Impedes Economic Recovery
Iran’s economic recovery continued to face headwinds as a second wave of COVID-19 infections hits Iran and as companies continue to cite concerns over the availability of raw materials. Whole Economy PMI dropped to 45.47 in the Iranian calendar month of Tir 1399 (June 21 – July 21), down from 48.41 a month earlier.
While overall economic output had increased over the last two months, the Whole Economy PMI sub-index for output fell below 50, falling from 51.05 last month to 46.40 in Iranian calendar month ending July 21. With COVID-19 cases reaching new daily highs in this period, weak demand in the services sector dragged the economy back into contraction.
Manufacturing PMI fell to 55.25 in the month ending on July 21, marking a slight decline from 56.80 in the month prior, meaning that the recovery of the manufacturing sector continues, but at a slower pace. The sub-index for new orders also saw a small decline, falling to 58.85 from 59.62 a month earlier.
As detailed in the last Bourse & Bazaar Iran PMI Report, across the Iranian economy, there are growing concerns over the availability of raw materials and parts, as currency volatility and continued disruptions in trade make it more difficult and more expensive to import goods to Iran. The Whole Economy PMI sub-index for raw materials inventory fell a significant 5.70 points to 35.29 to hit its lowest level in three months. Likewise, the Manufacturing PMI sub-index for raw materials inventory fell 3.43 points to 39.53.
The Manufacturing PMI data continues to trace the relationship between the rising cost of inputs and inflation. The sub-index for the purchase price of raw materials hit a new record high of 94.74, while the sub-index for the price of manufactured goods surged to 76.16—the highest level in 12 months.
The Iran Chamber of Commerce, which publishes this PMI data, noted in its report that manufacturing firms are getting squeezed on both the supply and demand sides. Depressed consumer demand has left firms reluctant to pass along all of the increased manufacturing costs to consumers.
But there may be relief on the horizon. The Whole Economy sub-index for the purchase price of raw materials marked a slight decline from 89.52 from 91.94 a month earlier, suggesting that if the Iranian rial stabilizes in the coming month, some of the upward pressure on prices will subside.
More positively, and perhaps in an indication that firms still consider these headwinds to be temporary, the PMI data points to a positive trend in employment. The Whole Economy PMI sub-index for employment rose from 44.76 to 49.37, led by increased hiring in the manufacturing sector. The Manufacturing PMI sub-index for employment rose from 55.81 to 56.49. This modest increase marked the third straight month of that the manufacturing sector has been adding jobs.
Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
PMI Report - Khordad 1399 (May 21 - June 20)
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Currency Weakness Slows Recovery
New Purchasing Managers’ Index (PMI) data published by the Iran Chamber of Commerce indicates that a surge in raw material prices, related to the weakening of the rial in the NIMA exchange through which importers purchase foreign currency, has begun impeding output.
Whole Economy PMI shows Iran’s economy dipping back into contraction in the Iranian calendar month of Khordad 1399 (May 21 – June 20). Whole Economy PMI fell to 48.41 from 50.17 in the prior month.
According to the chamber of commerce, businesses reported a deterioration in three key sub-indices—raw materials inventory, new orders, and employment—when compared to the previous month, suggesting that the post COVID-19 recovery has lost some of its early momentum.
The sub-index for the purchase price of raw materials hit a record high of 91.94, mirroring the record low value of the rial in the NIMA exchange. The chamber predicts that this price increase will add to inflationary pressures—the sub-index for the price of manufactured goods and services reached a nine-month high of 71.39 in Khordad 1399 (May 21 – June 20).
According to new data from the Statistical Center of Iran, inflation reached an annual rate of 27.8 percent in Khordad 1399 (May 21 – June 20).
The PMI reading of the employment sub-index dropped to its lowest rate (44.76) over the past quarter which ended on June 20. The chamber blames the decline on the extended shutdown of some businesses in the service sector. According to the report the services sector has observed a steeper decline compared to other sectors while the housing sector—observing an increase in activity—recorded improvement in employment sub-index.
Looking to the whole economy, confidence in the pace of the recovery has fallen. The sub-index for expectations of economic activity in the coming month dropped to 50.83 from 58.7 a month earlier, which reflects the concerns over raw material inventories and job creation.
But business in Iran continue to point to long-standing challenges as disrupting the COVID-19 recovery. The ongoing pressure of U.S. sanctions on Iran’s foreign exchange earnings as well as poor regulation of the foreign exchange markets continue to concern those businesses that depend on reliable and affordable imports.
Iran’s manufacturing sector continue to expand in Khordad 1399 (May 21 – June 20), but at a slower pace. Manufacturing PMI dropped to 56.8, down from 63.21 a month earlier. While manufacturing activity has returned to levels seen before the COVID-19 lockdown, the PMI survey identifies risks to continued expansion due to the possible shortages of raw materials, price volatility, and weakening demand. The combination of increased raw material prices and weakening demand could squeeze margins for many manufacturers.
Looking to specific sectors, the Iran Chamber of Commerce has highlighted a sharp increase in the price of machinery and spare parts for the mining sector, a shortage of raw materials in the rubber and plastic producers, and a reduction in the supply of electronic parts for the country’s electronics manufacturers. Across the board, delays in foreign exchange allocations have hampered timely and cost-effective imports of key inputs.
The impact on the sector is reflected in a decline in the Manufacturing PMI sub-index for output, which fell to 58.69 from 71.92 in the prior month. Sentiment has also grown more negative as the sub-index tracking expectations of economic activity in the coming month fell to 50.83 from 58.7 in the prior month.
While Iranian companies have had to confront many operational challenges over the last year, foreign exchange markets were stabilizing for much of the Iranian calendar year of 1399 (March 2019 – March 2020). The new volatility in the foreign exchange market, particularly in the NIMA rate, poses a major challenge for Iran’s economic policymakers.
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Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
PMI Report - Ordibehesht 1399 (April 20 - May 20)
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Iran’s Economy Rebounds Quicker Than Expected
New Purchasing Managers’ Index (PMI) data released by the Iran Chamber of Commerce suggests that Iran’s economy returned to expansion—a quicker recovery than expected—following two months of contraction brought on by COVID-19. The data for Ordibehesht 1399 (April 20-May 20) indicates Whole Economy PMI jumping to 50.17 from 28.68 a month earlier.
A PMI above 50 indicates an expansion in economic activity.
The new data suggests that the decision taken by Iranian authorities to ease the nationwide lockdown was followed by a swift rebound in economic activity, led by the manufacturing and construction sectors. The services sector continues to lag as social distancing measures and economic uncertainty continue to impact consumer demand.
Manufacturing PMI jumped to 63.21 in Ordibehesht 1399 (April 20-May 20), up from 28.06 in the previous month. The index swung from the lowest level recorded to a new high.
Manufacturers reported strong expectations around output, with the output sub-index rising to 71.92 from 20.37 in the previous month.
The employment sub-index also returned to expansion, rising to 56.24 from 42.72 in the previous month, meaning that COVID-19 suppressed job creation in the manufacturing sector for just two months, the only period in which manufacturers noted a contraction in employment over the last year.
The expansion in output and employment reflects a strong outlook for new orders—the sub-index measured 65.85, rising from 22.03 in the previous month.
Across the economy, concerns are focused on rising prices for both raw materials and finished goods. Manufacturers continue to report shrinking inventories, albeit to a lesser degree. The sub-index for raw material inventories rose to 43.52 from 32.83.
Looking to the economy at large, the sub-index for raw material purchase price rose to 89.05, likely reflecting concerns over the further devaluation of the rial following movement in the foreign exchange markets in Ordibehesht. Companies continue to cite difficulties in accessing foreign exchange and import bottlenecks as contributing to higher prices of inputs.
Continued high prices for raw materials can be expected to depress inventories and output. Increased costs are passed onto consumers, further contributing to inflation, which measured 29.8 percent in Ordibehesht 1399 (March 20-April 19). The dollar appreciated 12 percent against the rial in the same period. Most manufacturers expect to further increase prices, with the relevant sub-index rising to 66.22 from 49.87 in the previous month.
While the impact of COVID-19 on Iran’s economic output may be short-lived, the crisis has continued to underlying inflationary pressures that will hamper economic growth for the coming months.
Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
PMI Report - Farvardin 1399 (March 20 - April 19)
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Coronavirus Pushes Iran’s Economy into a Deeper Slump
The latest Purchasing Managers’ Index (PMI) data from the Iran Chamber of Commerce indicates that Whole Economy PMI has fallen to 28.68 in Farvardin (March 20-April 19)—the first month of Iranian calendar year of 1399—down from 31.39 in the preceding month.
A PMI above 50 indicates an expansion in economic activity.
The Iran Chamber of Commerce has been publishing Whole Economy PMI data for the last seven months. The sub-indices for sales, output, and new orders have dropped to the lowest level since the launch of the Whole Economy PMI report.
As a nation-wide lockdown shuttered retail businesses and as economic uncertainty reduced consumption, the sales sub-index, which includes both goods and services, declined to 17.17 in Farvardin 1399 (March 20-April 19), down from 29.17 in the preceding month. The sub-index for output dropped to 21.67 from 31.39. The sub-index for new orders fell to 21.45 from 47.60.
The new PMI figures mark the second consecutive month in which the contraction in economy activity has deepened. Data for the month of Bahman 1398 (January 21-February 19), the period just prior to the imposition of lockdown measures, shows Whole Economy PMI at 47.62.
With businesses reopening and government rolling out aid packages, Iranian businesses are hopeful that the overall economy is set to pick-up. The sub-index for expectations of economic activity in the coming month swung from 50.49 in Bahman 1398 (January 21-February 19) to just 23.82 in Esfand 1398 (February 20-March 19), before rebounding in Farvardin 1399 (March 20-April 19) to 50.49.
Iran’s severe coronavirus outbreak has derailed the country’s manufacturing sector, which had returned to robust expansion in recent months. In Farvardin 1399 (March 20-April 19), Manufacturing PMI fell to a record low of 28.06, down from 42.48 in the preceding month. Manufacturing PMI was 56.14 in Bahman 1398 (January 21-February 19).
Despite the impact of the COVID-19 outbreak, manufacturers expect activity to recover in the near term. The sub-index for “expectations of economic activity in the coming month” jumped to 69.11 from 27.52 in the preceding month.
Economists at the Iran Chamber of Commerce warn that because the sampling of the PMI survey is weighted towards Tehran, expectations for a quick rebound in economic activity may not be generalizable to the economy at large. Officials in Iran’s health ministry have warned of new outbreak clusters in several provinces around the country that could hamper efforts to ease the economy out of lockdown.
Whole Economy PMI
Manufacturing PMI
Photo: Abed Mirmasoumi
