Iran’s PMI Falls to 46.6 Last Month, Extending Economic Contraction to 20 Months

TEHRAN (Iran News) The seasonally adjusted index fell from the previous month, reflecting continued weakness across key areas of business activity. The PMI for the industrial sector, which had shown relative stability over the past two months, also returned to a downward trend.

The PMI is a composite indicator that measures overall business conditions, capturing the perceptions and expectations of economic actors regarding output, demand, employment, inventories, and prices. Readings below the neutral level of 50 indicate contraction.

According to the Chamber’s field survey, the decline in Aban confirms the persistence of recessionary conditions across the economy. During the month, several major components of the PMI moved further into contraction, including output levels, new customer orders, sales of goods and services, inventories of raw materials, and employment.

The report aligns with recent data from the Statistical Center of Iran on economic performance in the first half of the current year. Those figures show that GDP at constant prices, including oil, grew by only about 0.1% year-on-year. In contrast, GDP excluding oil contracted by 0.5%, highlighting continued weakness in sectors that are central to employment and non-oil value creation. This gap suggests that productive activities remain under pressure, while economic incentives continue to favor non-productive sectors.

The output index for production and service provision stood at 48.4 in Aban. Although the pace of decline eased slightly compared with the previous month, the index remained below 50 for the 20th consecutive month. Businesses cited rising exchange rates, higher raw material costs, limited access to financial resources, and subdued demand as the main factors restraining activity.

New customer orders registered a reading of 43.5, marking the 21st straight month of contraction. The sharper decline compared with the previous month points to a significant weakening of demand. Economic uncertainty, exchange rate volatility, and growing inflationary pressures have continued to erode purchasing power, particularly among middle- and lower-income households, making consumers more cautious.

Exports of goods and services, which influence new orders, also declined during the month. Businesses reported that foreign exchange repatriation requirements, trade restrictions, and geopolitical risks continued to hinder non-oil exports. Concerns over the potential tightening of sanctions have further raised risks for exporters, limiting foreign exchange earnings and weakening competitiveness. As a result, sales of goods and services fell for the second consecutive month in Aban. “Extending Economic”

Inventories of raw materials and purchased inputs declined more sharply than in the previous month, reaching their lowest level in nearly five years. The sharp rise in exchange rates and input prices, coupled with restrictions on foreign currency allocation and limited liquidity, has led to severe shortages of inputs. Inefficiencies in supply channels, including the commodity exchange system, have added to supply chain pressures.

Rising costs forced firms to increase selling prices, pushing the index for prices of produced goods and services to its highest level in 31 months.

Employment conditions also remained weak. The hiring index stayed below the neutral level for the sixth consecutive month, reflecting financial constraints on firms, declining real wages, and a growing shortage of skilled labor. The gradual reduction in formal employment has raised concerns about higher unemployment and potential strain on social security funds. “Extending Economic”

Despite the overall downturn, expectations for economic activity in the coming month improved for the second consecutive month, reaching a 14-month high. However, the report cautioned that this optimism remains fragile, largely driven by eased energy constraints. Businesses continue to identify stagflation, exchange rate volatility, weak demand, financial and currency restrictions, and political risks as the main threats to economic recovery.