PMI Reading No 100: A Tad Further Below Water


Friday, August 06, 2021 / 12:08 PM / by FBNQuest Research / Header Image Credit:  FBNQuest


Our manufacturing Purchasing Managers' Index (PMI) remained in negative territory in July, easing from 48.8 in June to 48.0. It was the first of its kind in Nigeria, and we have now achieved a century of reports. Readings for two of the five sub-indices fell in the month, and a further two were flat. Our partner, NOI Polls, collects the data.

An index is produced in advanced economies such as by the Institute for Supply Management (ISM) in the US, larger EMs such as Brazil, China and India, and a good number of emerging/frontier markets. It is based upon manufacturers' responses to set questions on core variables in their businesses. Our highest reading to date has been 68.7 in December 2017 and our lowest 43.3 during selective lockdown in May 2020.

In our unweighted model (that of the ISM), respondents are asked whether output, employment, new orders, suppliers' delivery times and stocks of purchases have increased over the previous month, are flat or have fallen. A headline reading over 50 (ex 100) indicates expansion for the sector.


On a 12-month moving average basis, the headline index weakened from 51.9 to 51.5 in July.


PMIs, unlike the national accounts, are forward-looking indicators. Neither in Nigeria is seasonally adjusted. Our indices are now running four months ahead of the accounts, the latest of which covers Q1 '21. They move markets in advanced economies, which was evident during lockdown and the recovery from it across jurisdictions in H1 '20.

Proshare Nigeria Pvt. Ltd.


The FGN has set a target of a 20% manufacturing share of GDP by 2023. This is ambitious, the latest figure being 12.8% in 2020 at current prices. The aspiration is drawn, we assume, from East Asian success stories. In this model commercial agriculture provides the raw materials for a wide range of manufacturing goods, which would explain why the federal industry ministry plans to finalise strategies for oil palm, and clothing and textiles later this year.


Manufacturing may have supplanted retail trade and become the second largest sector in the economy in Q1 (after agriculture). However, it is far from generating an Asian multiplier effect on wealth and employment.


It is broadly producing consumer goods for a large population that is growing at a decent rate. Those segments in heavy industry contribute little overall: oil refining; basic metal, iron and steel; and if we are being charitable, motor vehicles and assembly.


The NOI surveys include trigger questions, which are put to respondents when they have given the same answer on a sub-index for two successive months and changed it for the third.  Responses in this survey are thinner than usual because of the modest changes in readings across the sub-indices. The common negative themes are again the rainy season, and the high cost of raw materials.  


The most popular answer in our surveys is 'no change', accounting for over 50% of responses for all sub-indices. In employment and suppliers' delivery times, its share exceeded 85%.


The best performing sub-sector during life with COVID has been cement. Its contribution to manufacturing GDP at current prices has increased to 21.1% of the total in Q1 '21 from 18.6% one year previously.


The main inputs for cement production, unlike textiles and footwear for example, are available locally. Additionally, the FGN has an ambitious agenda for capital spending. Two large cement producers in our coverage posted sales growth of 8% and 3% q/q in Q2 '21. The y/y ratios look far better but are comparisons with Nigeria's quarter of lockdown (Q2 '20).


China's manufacturing PMI (the official series) weakened from 50.9 to 50.4 in July. This is the lowest reading since the country emerged from the pandemic in Q1 '20. The sub-indices for employment and export sales were particularly weak.

Proshare Nigeria Pvt. Ltd.


Related News

1.              PMI Reading No 99: Back Below Water

2.             PMI Reading No 98: Lower But in Positive Territory

3.             PMI Reading No 97: A Welcome Uptick

4.             PMI Reading No 96: A Modest Retreat

5.             PMI Reading No 95: Above Water Again

6.             PMI Reading No 94: Familiar Seasonal Low in January 2021

7.              PMI Reading No 93: A Seasonal High for the Year

8.             PMI Reading No 92: Recovery from the Protests

9.             PMI Reading No 91: In The Shadow of Protests

10.         PMI Reading No 90: A Welcome Step Forward

11.           PMI Reading No 89: Marginal Slip, Still Positive

12.          PMI Reading No 88: Weaker Yet Above Water

13.          PMI Reading No 87: Back in Positive Territory

14.          Manufacturing PMI Still Weak

15.          PMI Reading No 86: A New Low for the Headline

16.          Manufacturing PMI Stands at 41.1% in June 2020 from 42.4% in May 2020

17.          PMI Reading No 85: Damage From the Lockdown

18.         PMI Reading No 84: Fall on Global Headwinds

19.          Manufacturing PMI Stands at 51.1% in March 2020 from 58.3% in February 2020

20.        PMI Reading No 81: Well Above Water

21.          Manufacturing PMI Stands at 60.8% in December 2019 from 59.3% in November 2019

22.         PMI Reading No 80: A Seasonal Boost

23.         Manufacturing PMI Stands at 59.3% in November 2019 from 58.2% in October 2019

24.         Manufacturing PMI Stands at 58.2% in October 2019 from 57.7% in September 2019

25.         Manufacturing PMI Stands at 57.7% in September 2019 from 57.9% in August 2019

26.         Manufacturing PMI Stands at 57.9% in August 2019 from 57.6% in July 2019 

27.         PMI Reading No 76: Again Below Water

28.        Manufacturing PMI Stands at 57.4% in June 2019 from 57.8% in May 2019

29.         PMI Reading No 73: In The Comfort Zone

30.        PMI Reading No 71: Election-driven Drift

31.          PMI Reading No 70: A Seasonal Slump

32.         PMI Reading No 69: Well Above Water

Proshare Nigeria Pvt. Ltd.
Related News