Monday, May 04, 2015 8:44 AM / FBN Capital Research
The latest report for our manufacturing Purchasing Managers’ Index (PMI) shows a gentle decline in the headline reading from 55.2 in March to 54.0. 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 many marked m/m 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 normal 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.
However, our last four monthly headline readings have shown a relative stability which would be consistent with a developed economy. This masks some strong movements in the sub-indices, notably a steep rise for the workforce from 52 to 61 in April driven by the responses of medium-sized operations of between 50 and 200 employees.
The national accounts show a decline in manufacturing growth from 16.0% y/y to 13.5% in Q4 2014. We would expect a further slowdown in the data for Q1 2015 due later this month.
In terms of trends by size, the larger companies posted a clear decline in output in April and the small firms a reasonable improvement. For new orders, the small firms were again the strongest performers.
We are encouraged by the fact that the two more forward-looking indicators (workforce and new orders) were comfortably the strongest of the five.