PMI Reading No 80: A Seasonal Boost


Monday, December 02, 2019   /09:53 AM  / By FBNQuest Research / Header Image Credit: Proshare


Our manufacturing Purchasing Managers' Index (PMI), the first in Nigeria, picked up in November from 54.1 to 56.4. Our valued partner, NOI Polls, has gathered and compiled the data. The index is found in developed markets (such as the ISM's in the US), larger emerging markets such as China, India and Brazil, and a few frontiers. It is based upon manufacturers' responses to set questions on core variables in their businesses. In our case, it is not seasonally adjusted. Our highest reading was 68.7 in December 2017, and our lowest 44.6 in January 2016.


In our unweighted model (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 14 negative readings since our launch in April 2013, the most recent being in July this year.


Our sample is a representative blend of large, medium-sized and small companies, spread across the six geopolitical zones.


PMIs are forward looking indicators, our latest covering the second month of the fourth quarter. In contrast, the national accounts are historic data: the latest accounts for Q3 show non-oil GDP growth of 1.8% y/y and manufacturing growth of 1.1%.


The telling point from the report in November is the recovery in the sub-index for output: it fell by more than seven points the previous month but has now regained some of the lost ground. Answers to our trigger questions in October indicated the negative impact of the land border closure in the form of poor access to raw materials. They were not repeated in the latest report, suggesting that firms have made alternative arrangements,


A trigger question is prompted when a respondent has given the same answer for a sub-index for two successive months, and changes it for the third.


The readings for new orders and output improved in the build-up to the holiday season in line with annual trends.


In the months ahead, we will be watching for the impact of the steep rise in lending volumes on the sector. The monetary policy committee last week reported an increase of N1.17trn in “absolute gross credit” since end-May, including N460bn for manufacturing. It added that borrowing rates have declined by up to 400bps over the same period. Since our reports cover companies of all sizes, we would expect to see a positive impact.


On a 12-month moving average basis, the headline slowed from 53.9 to 53.6. 


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