August PMI Shows Economic Activities Still in Contraction Amid Slow Recovery - PFI Capital


Monday, August 31, 2020 / 02:20PM /PFI Capital /Header Image Credit: PFI Capital 


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The Central Bank of Nigeria's Manufacturing Purchasing Managers' Index (PMI) for August stood at 48.5 index points, indicating contraction in the manufacturing sector for the fourth consecutive months while the PMI for the non-manufacturing sector stood at 44.7 points in August 2020, indicating contraction in non-manufacturing activities for the fifth consecutive months.


Jointly, the average PMI (both for manufacturing and non-manufacturing sectors) for August stood at 46.6, according to our analysis, contracting for the fourth month since May.


With a month left to complete the third quarter, our average manufacturing and non-manufacturing PMI reading for August translates to an average of 45.35, pointing to another contraction in Q3 if September PMI (for both manufacturing and non-manufacturing sectors) falls below an average of 59.3.


The PMI is a survey of sentiments in both manufacturing and non-manufacturing sectors of the economy, and the index historically shows it possesses predictive power for the direction of growth in output. Thus, a contracting PMI most likely suggests GDP growth for the third quarter will remain in the negative albeit an improvement over the 6.1% decline seen in the second quarter of the year.


Analysis of the components of manufacturing PMI showed production level remaining in a contraction for the fourth month at 49.2 points in August, the same index as new orders which contracted slower from the previous month.


Suppliers delivery time index was at 53.0 points in August 2020, indicating faster supplier delivery time for the fourth time while employment level index for the month stood at 44.6 points, indicating contraction in employment level for the fifth consecutive months. The manufacturing sector inventories index contracted for the fifth time in August 2020 at 46.1 points, the index declined in the review month.


We see these developments signaling the measured pace of progress made in getting business activities back to pre-COVID levels as the economy reopens with a vaccine or cure, and multi-faceted challenges like acute dollar scarcity, the partial restoration of international linkages, depressed levels of consumer demand etc.


Patterns in components of non-manufacturing PMI in August were similar pointing to the same general constraints for businesses in the economy.


A breakdown of sectoral performance


Under manufacturing sub-sector, cement index expanded from 48.6 points in July to 64.4 points in August. Chemical & pharmaceutical products also moved into expansion territory of 52.2 points in August, from the previous month. Nonmetallic mineral products, Plastics & rubber products, Textile, apparel, leather & footwear  and transportation equipment expanded from previous contraction.


On the other hand, electrical equipment, fabricated metal products, Food, beverage & tobacco products, Furniture & related products, Paper products, Petroleum & coal products, primary metals, and Printing & related support activities remained in contraction.


For non-manufacturing activities, all sub-sectors remained below expansionary levels. The most improved was utilities which grew from 31.3 points in July to 50.0 points in August, a transition from contraction to stationary.


Accommodation and food services index rose from 43.6 points to 45.7 points, Agriculture rose from 44.3 points to 48.7 points.


Arts, Entertainment & Recreation index worsened from 65.3 points to 45.3 points, which is from an expansion to a contraction. Repair, Maintenance/Washing of Motor Vehicles also trended in similar fashion.


Other sub-sectors including construction, education services, finance & insurance, information & communication, transportation & warehousing etc remained in contraction.

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Previous Report from PFI Capital Limited


1.      Nigeria Nears Recession with 6.1% Contraction in Q2-2020 - PFI Capital

2.     Food Price Pressure Stokes Inflation to 28-month High in July - PFI Capital

3.     Unemployment Heads for New-High - PFI Capital Limited

4.     Nigeria's COVID-19 Induced Foreign Trade Decline - PFI Capital

5.     Inflationary Pressure Likely to Decelerate in July - PFI Capital Limited

6.     Implications of CBN's Exchange Rate Unification - PFI Capital Limited

7.     A More than Expected Slowdown in Global Growth - PFI Capital

8.     Nigeria's Double-Whammy: Inflation and Unemployment - PFI Capital

9.     Performance Review of the Economic Recovery and Growth Plan - PFI Capital

10.  Implications of Nigeria's Consumption Expenditure Pattern - PFI Capital Limited



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