PMI: Broad Based Slowdown Reflects the Impact of COVID-19 Restrictions

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Tuesday, June 02, 2020 / 11:28 AM / By CSL Research / Header Image Credit: CSL Research


The Purchasing Managers Index (PMI) data released by the Central bank of Nigeria (CBN) for the month of May showed significantly weakened activity levels. Although, no data was provided for the month of April (the period of full lockdown in Lagos, the epicenter of economic activities), the data for May in our view still reflects the full impact of the global pandemic. Specifically, Manufacturing PMI declined from 51.1 in March to 42.4 in May, the lowest level since September 2016. However, the impact of social distancing measures was more pronounced in the Non-manufacturing PMI, which declined significantly from 49.2 in March to 25.3 in May, the lowest level since the apex bank began compiling the data in July 2014.


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Notably, the data revealed that, of the 14 surveyed subsectors in the manufacturing sector, only the electrical equipment sector reported growth. Save for Supplier delivery time (+15.8) which grew on the back of reduced delays from suppliers, we observed deep contractions in the remaining four indices used in gauging the manufacturing sector; Employment level (-22.6), Raw materials/WIP Inventory (-12.0), Production level (-9.9) and New orders (-9.5).We believe the combination of supply chain disruptions, FX challenges, slowdown in production runs and reduced demand from customers dampened manufacturing activities.


Like the manufacturing-PMI, the non-manufacturing PMI also showed steep decline across the four key metrics; Business Activity (52.2 to 19.5), Inventory level (49.6 to 30.1), Level of new orders (47.8 to 19.6), and Employment level (47.3 to 32.0) used in gauging activity level. We believe the deterioration in the sector is a fallout of the effect of subdued economic activities and continued adoption of social distancing measures which hindered the free movement of people and patronage of entertainment or recreational centres.


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Despite the partial easing of the lockdown measures and stimulus measures from the monetary authority, we expect activities to remain soft in the short term due to weak demand which will continue to weigh on inventories, production runs, employment level, imports of raw materials and backlog of orders.   


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