In its latest report on the state of the Purchasing Managers Index (PMI), the Research Center of the Iranian Chamber of Commerce has reported the worsening of the country’s economic outlook components.
The report states that in the coming months, a shortage of raw materials could seriously affect the trend of economic improvement, especially in the industrial sector.
The Research Center of the Chamber of Commerce, affiliated with the Iranian regime, says that significant trade deficit in 2023 and the increasing gap between the prices of free market currency and government currency in recent months are factors that could restrict the allocation of foreign currency resources for importing raw materials in the coming months.
Earlier, the International Monetary Fund had also predicted that Iran’s economic growth would decrease from 4.7 percent last year to 3.3 percent this year and 3.1 percent next year.
Iran’s non-oil trade deficit also reached a historic record of nearly $17 billion last year.
The Research Center of the Chamber of Commerce has warned that the possible increase in the exchange rate and the reduction in the allocation of foreign currency for importing raw materials in the coming months could intensify restrictions on access to production raw materials and, consequently, halt the industrial improvement trend.
In recent weeks, there have been numerous reports of the government’s inability to allocate foreign currency for importing goods, even medicine.
The exchange rate of the dollar against the Iranian rial is still 20 percent higher than May of last year, despite a relative decrease compared to last month.
Purchasing Managers Index
When calculating the purchasing managers index, if the obtained number is more than 50 units, it indicates that the economy is developing, and if this figure falls below 50 units, it indicates that the economy is on the verge of contraction and recession.
The report of the Iranian Chamber of Commerce evaluates the PMI for March 2024 as 39.6, which has been adjusted to 51.5 (eliminating the effect of Iranian New Year holidays starting from March 21), indicating a relative improvement compared to February, but lower than the March of last year.
Last March, the overall PMI of the economy, with adjustments, was around 53.7 units.
The details of the overall PMI indicate that some components are facing a decline, especially the “production or service provision level” index, which is estimated at 49 after adjustment in March, indicating a decrease in the production of goods and services in this month compared to February 2023, even after removing the effect of new year’s holidays.
The “inventory of raw materials or purchased items” index in March was also estimated at 49.7, indicating a decrease in the inventory of raw materials to produce goods, and the index of the price of raw materials or purchased items has reached 72.3, indicating a significant increase in the price of raw materials compared to February 2023.
While Iran’s non-oil exports faced a 7 percent decline last year, the Chamber of Commerce report indicates that the “volume of goods exports” index in March of this year, even after seasonal adjustment, was around 48.1, indicating a relative decrease in goods exports compared to February 2023.
Meanwhile, the “employment and labor utilization rate” index in March, after seasonal adjustment, was estimated at 52, but the Chamber of Commerce says that although the trend of this index from October 2023 to March 2024 indicates continuous employment improvement in the country, conditions are not the same for all skill levels.
According to this report, available evidence and statements from economic actors indicate that high inflation and continuous pressures on living costs have made unskilled labor reluctant to engage in employment at current wage levels, creating “serious problems” for some economic sectors.
