PMI Reading No 52: A Fifth Month Above Water


Tuesday, August 01, 2017  9.38AM / FBNQuest Research                                                                                           

Our manufacturing Purchasing Managers’ Index (PMI), the first of its kind in Nigeria, shows a modest improvement from 55.9 in June to 56.3. Our partner, NOI Polls, has gathered and compiled the data.

The index report is a familiar data release at the start of the calendar month in developed markets (such as the ISM’s in the US), the larger emerging markets such as China and a few other frontiers. It is based upon the responses of manufacturers to set questions on core variables in their businesses.

PMIs are forward-looking indicators of sentiment in all economies, and have the proven capacity to move financial markets in developed economies. To reinforce the point, the latest national accounts cover the first quarter (January-March) and the latest PMI the first month of the third. 


In the unweighted model of our choice (the ISM’s), respondents are asked whether output, employment, new orders, suppliers’ delivery times and stocks of purchases have improved on the previous month, are unchanged or have declined. A headline reading of 50 is neutral. We have posted nine negative readings since our launch in April 2013 including five in 2016.

Our sample is an accurate blend of large, medium-sized and small companies.

Three of the five sub-indices picked up in July and all were in positive territory. The headline reading has been above 50 since March.


We have also added “trigger” questions, which apply when the respondent has the same answer on a sub-index for two successive months and then changes it for the third.


Explanations for changes in output in July cite the rainy season as both positive and negative. Not surprisingly, one respondent explains a rise in stocks as the consequence of naira appreciation and the lower cost of imported raw materials.


Since March the CBN has stepped up its sales of fx to importers, SMEs and retail (for invisibles). Two positive consequences for the sector have been far greater availability of raw materials and naira appreciation (see above bullet). The food and beverages segment has been the main beneficiary.


The economy is finally emerging from recession. In Q1 2017 its contraction narrowed from -1.7% y/y the previous quarter to -0.5%. Manufacturing posted positive growth of 1.4% y/y, the first since Q3 2015. We see a recovery in GDP growth to 1.6% y/y in Q2 2017.

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