PMI reading no 23: unusually flat


Monday, March 02, 2015 9:53 AM / FBN Capital Research


The latest report for our manufacturing Purchasing Managers’ Index (PMI) shows a marginal decline in the headline reading from 56.4 in January to 56.2. Our partner in this exercise, NOI Polls, has compiled the data. The index is a familiar release at the start of the calendar month in developed markets (such as the ISM in the US), the larger emerging markets like Brazil and China, and a few other frontier markets such as Vietnam.


The index is based on the responses of a number of manufacturing companies to set questions on core variables in their businesses. It is unweighted.

In the model we have chosen (the ISM’s), they are asked whether output, employment, new orders, suppliers’ delivery times and stocks of purchases have improved, are unchanged or have declined. They are asked to make allowances for seasonal factors in their responses. A reading of 50 is neutral.

Our sample is a representative blend of large, medium-sized and small companies.

We have seen several marked swings since we launched our index in April 2013 but only once has there been a negative headline reading (49.4 in July 2013).

These swings are to be expected for frontier markets such as Nigeria. The operating environment for business is highly fluid: access to electricity, fuel and credit is uneven, particularly for small companies, which creates swings in business and consumer confidence. Our headline reading for February, therefore, is unusual because it represents the smallest m/m change since our launch. Less surprisingly, it masks some pronounced changes among the sub-indices (notably a sharp fall from 57 to 42 for delivery times).

The national accounts show manufacturing growth of 13.5% y/y in Q4 2014. Such strong growth, following 16.0% y/y the previous quarter, is consistent with the consumption-led transformation of a pre-emerging market.

The improvement in the reading for output was driven by the large companies. Otherwise there were no marked variations between company sizes. It is difficult therefore to identify the influence of either the macro headwinds (slide in the oil price) or the political uncertainty (postponement of the elections).

For the fifth successive month, the reading for new orders was the highest of the five sub-indices.


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