PMI Report - Ordibehesht 1399 (April 20 - May 20)
___STEADY_PAYWALL___
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
