PMI Reading No 101: Moving Closer to Neutral

Proshare

Wednesday, September 01, 2021 / 11:11 AM / by FBNQuest Research / Header Image Credit: Fisdom

                                                                                                                                                                                    

Our manufacturing Purchasing Managers' Index (PMI) remained in negative territory in August, improving from 48.0 in July to 49.6. It was the first of its kind in Nigeria and we have now achieved a century of reports. Readings for all five sub-indices posted increases in the month. 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 China, India, and Russia, 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.

 

On a 12-month moving average basis, the headline index weakened from 51.5 to 51.3 in August.

 

PMIs, unlike the national accounts, are forward-looking indicators. Neither in Nigeria is seasonally adjusted. They move markets in advanced economies, which was evident during lockdown and the recovery from it across jurisdictions in H1 '20.

 

Manufacturing registered 3.5% y/y growth in Q2 '21. We had hoped for a better figure, given that it contracted by -8.8% in the year-earlier period (the quarter of lockdown in Nigeria). The largest segment (food, beverages and tobacco) managed 4.9% growth in Q2.   

 

The star performer has been cement, which has steadily grown throughout the COVID-19 pandemic other than Q2 '20. Its contribution to manufacturing GDP at current prices has increased to 20.2% of the total in Q2 from 14.8% 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. It has recently announced the release of NGN1.30trn to ministries, departments and agencies for this purpose. Two large cement producers in our coverage posted sales growth of 8% and 3% q/q in Q2 '21.

 

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.  The common positive themes this time are an improvement in demand and a reward for investment in sales and marketing.  We suspect that respondents in some segments are benefiting from their competitors going out of business. Challenges in accessing fx for imports of raw materials have been acute.  

 

The most popular answer in our surveys is 'no change'. This accounted for more than 50% of responses for all five sub-indices. In one case (employment) its share exceeded 80%. Since the economy has not grown in per head terms for six years, we should not be surprised that our respondents are hesitating before increasing their staff count.   

 

China's manufacturing PMI (the official series) weakened from 50.4 to 50.1 in August. The sub-index for new orders was below water and the reading for its component, new export orders, fell to 46.7. Since China is the largest importer of crude oil, we hope that this and other alarm bells from its data releases prove to be aberrations.


Proshare Nigeria Pvt. Ltd.


Related News

1.       PMI Reading No 100: A Tad Further Below Water

2.      PMI Reading No 99: Back Below Water

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

4.      PMI Reading No 97: A Welcome Uptick

5.      PMI Reading No 96: A Modest Retreat

6.      PMI Reading No 95: Above Water Again

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

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

9.      PMI Reading No 92: Recovery from the Protests

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

11.    PMI Reading No 90: A Welcome Step Forward

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

13.   PMI Reading No 88: Weaker Yet Above Water

14.   PMI Reading No 87: Back in Positive Territory

15.   Manufacturing PMI Still Weak

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

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

18.  PMI Reading No 85: Damage From the Lockdown

19.   PMI Reading No 84: Fall on Global Headwinds

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

21.   PMI Reading No 81: Well Above Water

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

23.  PMI Reading No 80: A Seasonal Boost

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

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

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

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

28. PMI Reading No 76: Again Below Water

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

30. PMI Reading No 73: In The Comfort Zone

31.   PMI Reading No 71: Election-driven Drift

32.  PMI Reading No 70: A Seasonal Slump

33.  PMI Reading No 69: Well Above Water

 

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP