PMI February 2016; Higher stocks, higher output


Tuesday, March 01, 2016 12:29 PM /FBNQuest Research

Main conclusions

·      Recovery in February headline to 50.6

·      Three sub-indices in positive territory

·      Highest for delivery times

·      Lowest for workforce 

We release today the latest reading (no 35) of our manufacturing Purchasing Managers’ Index (PMI) for Nigeria, which takes the temperature of the sector. Our PMI was the first in Nigeria. It has become a core forward indicator for analysts, policymakers and financial market players.    

A PMI is a simple exercise. A selection of companies is asked their view each month on core variables in their business. The respondent, who is characteristically the purchasing manager in a larger firm, has three choices of reply: better, unchanged or worse than the previous month. According to the most used methodology, 50 marks a neutral reading and anything higher suggests that the manufacturing economy is expanding. Readings are released at the very beginning of the new month.

In our case, the five variables are output, employment, new orders, delivery times from suppliers and stocks of purchases. They have equal weightings in our index. Our reports cover a representative sample of the sector with large, medium-sized and small firms. Any broad conclusions about the economy on the basis of our reports need to be tentative because we are operating in a near void: there are few data series on sectoral trends.

GDP growth in Q3 2015 picked up from 2.4% y/y to 2.8%. The improvement, however, was driven by the oil sector, which posted growth of 1.1% y/y (after contraction of -6.8% the previous quarter). The manufacturing sector contracted by -1.8% y/y, compared with -3.8% in Q2. The sector represented 9.3% of constant price GDP in Q3, and its largest segment is food, beverages and tobacco. 

Our latest headline reading shows a healthy increase from 44.6. Those in the final quarter of last year were comfortably in positive territory due to the seasonal pick-up in demand for the festivities in December.

The current challenge of sourcing fx across the country has placed a huge strain on manufacturers, and therefore on consumers. We link the improvement in the headline to the higher reading for stocks, which enabled firms to raise their levels of production.


We are seeing a rebound from a very poor headline in January, nothing more. The reading for employment remains below the water, telling us that respondents do not view a bright future in the near term. Given the fx challenges, we would expect companies to be shifting production to local inputs, where possible. One manufacturing company under our coverage disclosed that it currently has agreements with local suppliers of palm oil as a precautionary measure due to the increased cost of inputs.



Related News


1.       PMI reading no 35 is just above neutral

2.      January 2016 Purchasing Managers’ Index is worst reading to date, fx the culprit

3.      Purchasing Managers’ Index reading no 34 is below water, fx to blame

4.      PMI reading no 33: healthy and flattish – Jan 04, 2016

5.      December 2015 PMI is well above water for now – Jan 04, 2016

6.      November 2015; Comfortably above water – Dec 01, 2015

7.      PMI reading no 32: Still above water – Dec 01, 2015

8.     PMI reading no 31: a modest pick-up – Nov 02, 2015

9.      PMI reading no 30: Just above the water – Oct 02, 2015

10.  PMI reading no 29: another sign of the times – Sep 01, 2015

11.   August 2015; return to negative territory – Sep 01, 2015

12.  PMI reading no 28: decline in the macro headwinds – Aug 03, 2015

13.  PMI reading no 27: more robust across the board – Jul 01, 2015

14.  July 2015; Back in positive territory – Jul 01, 2015

15.   PMI reading no 26: below water – Jun 01, 2015

16.  PMI reading no 25: good workforce reading – May 04, 2015

17.   April 2015; Comfortably above water – May 04, 2015



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