Nigeria Economy | |
Nigeria Economy | |
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PROSHARE | |
PROSHARE |
Friday,
April 03, 2020 / 09:41 AM / By FBNQuest Research / Header
Image Credit: Proshare
Our
manufacturing Purchasing Managers' Index (PMI), the first of its kind in
Nigeria, slipped from 51.7 to 47.9 in March. Our partner, NOI Polls, has
compiled the data. The index is to be found in advanced economies such as the
ISM's in the US, larger EMs like China, India and Russia, and a few 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 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 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. Our previous sub-neutral/negative reading was 49.5 in July
2019.
Our sample of respondents is a representative blend of small,
medium-sized and large companies across the six geopolitical zones.
PMIs are forward-looking indicators with a track record of moving
markets in advanced economies and the largest EMs. The official manufacturing
PMI in China crashed from 50.0 to a record low of 35.7 in February under the
impact of coronavirus. As workers returned to their homes after the holiday for
the Lunar New Year and factories started to resume production, so the headline
recovered to 52.0 in March. In both cases, the index was the most timely data
release to inform markets.
Nigerian manufacturing is dominated by consumer goods industries. The
index therefore peaks in December for the holiday season and invariably slumps
in January.
The index can go either way in March. In this case, the negative drivers
would have been the spread of the coronavirus internationally and the crashing
of the oil price. Answers to our trigger questions cite the virus as helping to
explain worse output, new orders and stocks of purchases. These questions arise
when a respondent has given the same answer for a sub-index for two successive
months and changes it for the third.
In March the impact of the virus would have been mostly imported (such
as reduced supplies of inputs from China and elsewhere). To give a very rough
idea of the impact of a domestic lockdown on manufacturing, we see that the
headline PMI readings in March tumbled from 49.2 to 44.5 for the Eurozone, 48.0
to 45.4 for Germany and 48.7 to 40.3 for Italy. The restrictions in Italy were
the longest and the deepest in the Eurozone in March.
On a 12-month moving average basis, the headline index retreated from
53.8 to 53.0 in March.
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