PMI Reading No 98: Lower But in Positive Territory

Proshare

Tuesday, June 01, 2021, 11:01 AM / by FBNQuest Research / Header Image Credit:  FBNQuest


Proshare Nigeria Pvt. Ltd.


Our manufacturing Purchasing Managers' Index (PMI) retreated from 53.0 to 51.0 in May. It was the first of its kind in Nigeria. 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.

 

PMIs, unlike the national accounts, are forward-looking indicators. Q2 '20, which was broadly the quarter of lockdown in Nigeria, proved the low point of the year of Covid-19 for both series. 

 

The latest national accounts (for Q1 2021) shows GDP grew by 0.5% y/y, compared with growth of 0.1% recorded in the previous quarter. Manufacturing grew by 3.4% y/y in Q1. Its largest segment (food, beverages and tobacco) expanded by 7.1% y/y.

 

The decrease in the headline PMI posted in May was mirrored across three of the five sub-indices.  Based on our survey, economic challenges still persist, and this has a direct impact on consumer behavior. Consumer demand remains fragile. Similar to the trend that was observed pre-pandemic. Furthermore, the current inflationary conditions in Nigeria adversely affect the profitability of the manufacturing sector.

 

Our 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 then change it for the third.  Themes in this report include a lack of capital/funds to purchase raw materials for production as well as limited access to raw materials.   

 

The most common answer in our surveys is 'no change'. This accounted for more than 50% of responses for all five sub-indices. In two cases (employment and suppliers' delivery times) its share exceeded 80%.

 

The reading for the employment sub-index decreased marginally from 51 to 50.5 in May. Manufacturers continue to adopt the wait-and-see approach with regards to taking on additional labour (particularly for full-time roles). The proportion of no change responses accounted for 93% of the total.

 

The manufacturing sector is currently the fourth largest sector, it accounted for 9.9% of total GDP in Q1 '21. However, the potential of the sector is yet to be fully tapped. Several government interventions are required to  assist with steady expansion of this sector. Based on the latest MPC communique, under the NGN1.0trn manufacturing intervention stimulus a total of NGN856bn has been disbursed to 233 projects across various segments in light manufacturing among other industries.

 

Meanwhile, according to the National Bureau of Statistics (NBS), loans extended by deposit money banks (DMBs) totalled NGN20.37trn in Q4 2020, compared with NGN19.87trn the previous quarter. The second-largest recipient of loans in Q4 was the manufacturing sector, which accounted for 16% of the total.

 

On a 12-month moving average basis, the headline index picked up from 51.7 to 52.3 in May.


Proshare Nigeria Pvt. Ltd.


Related News

1.       PMI Reading No 97: A Welcome Uptick

2.      PMI Reading No 96: A Modest Retreat

3.      PMI Reading No 95: Above Water Again

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

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

6.      PMI Reading No 92: Recovery from the Protests

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

8.      PMI Reading No 90: A Welcome Step Forward

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

10.  PMI Reading No 88: Weaker Yet Above Water

11.    PMI Reading No 87: Back in Positive Territory

12.   Manufacturing PMI Still Weak

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

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

15.   PMI Reading No 85: Damage From the Lockdown

16.   PMI Reading No 84: Fall on Global Headwinds

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

18.  PMI Reading No 81: Well Above Water

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

20. PMI Reading No 80: A Seasonal Boost

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

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

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

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

25.  PMI Reading No 76: Again Below Water

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

27.  PMI Reading No 73: In The Comfort Zone

28. PMI Reading No 71: Election-driven Drift

29.  PMI Reading No 70: A Seasonal Slump

30. PMI Reading No 69: Well Above Water


Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

 

 

 

 

 

READ MORE:
Related News
SCROLL TO TOP