September 01, 2020 /09:30 AM / By FBNQuest Research /
Header Image Credit: Ecographics
manufacturing Purchasing Managers' Index (PMI), the first of its genre in
Nigeria, declined gently from 52.8 to 52.3 in August. Our partner, NOI Polls,
has compiled the data. The index can be found in advanced economies such as the
ISM's in the US, larger EMs like China, India and Russia, and some other
frontier markets. 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 43.3 in May this
unweighted model (that of the Institute for Supply Management), respondents are
asked whether output, employment, new orders, suppliers' delivery times and
stocks of purchases have increased over the previous month, are unchanged or
have declined. A headline reading of 50 (ex 100) is neutral, and anything
higher points to expansion in the sector.
sample of respondents is a representative mix of small, medium-sized and large
companies across the six geopolitical zones.
PMIs, unlike the national accounts, are forward-looking indicators with
a proven record of moving financial markets in advanced economies and the
largest EMs. There have been some large monthly swings of more than ten points
this year due to Covid-19.
August, three of the five sub-indices recorded increases. The marginal upticks
seen in output, new orders and stocks of purchases are not surprising. Although
demand is relatively stronger, we note that prior to the recent disruptions to
consumption patterns due to Covid-19 and going back to Nigeria's last
recession, consumer pockets had been squeezed and were yet to be rebuilt.
output sub-index reading increased from 54 in July to 55.5. The trend was seen
primarily in medium-sized companies. Responses to our trigger question for the
increase in output were gradual pickup in demand due to the relaxation of
lockdown, better access to affordable raw materials and for some, revamped
marketing strategies assisted with stimulating demand.
Among the sub-indices, the most popular response by respondents is 'no
change', which accounts for at least 55 per cent of answers.
Affordable credit is still a major challenge for manufacturers and for
some, it has worsened due to the challenges triggered by the virus. That said,
the sector has benefitted from increased lending on the back of the CBN's
directives to banks to raise their minimum loan-to-deposit ratio (LDR). At its
latest meeting held in July, the monetary policy committee noted that through
this directive on LDR, credit allocation increased by N3.3trn over a 12-month
period, with manufacturing emerging as major beneficiaries.
On a 12-month moving average basis, the headline index rose from 51.1 to
52.2 in August.
PMI Reading No 88: Weaker Yet
2. PMI Reading No 87: Back in
PMI Still Weak
Reading No 86: A New Low for the Headline
PMI Stands at 41.1% in June 2020 from 42.4% in May 2020
Reading No 85: Damage From the Lockdown
Reading No 84: Fall on Global Headwinds
PMI Stands at 51.1% in March 2020 from 58.3% in February 2020
PMI Reading No
81: Well Above Water
PMI Stands at 60.8% in December 2019 from 59.3% in November 2019
Reading No 80: A Seasonal Boost
PMI Stands at 59.3% in November 2019 from 58.2% in October 2019
PMI Stands at 58.2% in October 2019 from 57.7% in September 2019
PMI Stands at 57.7% in September 2019 from 57.9% in August 2019
PMI Stands at 57.9% in August 2019 from 57.6% in July 2019
Reading No 76: Again Below Water
PMI Stands at 57.4% in June 2019 from 57.8% in May 2019
18. PMI Reading No
73: In The Comfort Zone
PMI Reading No
71: Election-driven Drift
20. PMI Reading No
70: A Seasonal Slump
PMI Reading No
69: Well Above Water