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
