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
