PMI Reading No 104: A Seasonal Pickup


Wednesday, December 01, 2021 / 11:13 AM / by FBNQuest Research / Header Image Credit: Ecographics

Our manufacturing Purchasing Managers' Index (PMI) surged from 49.6 to 57.4 in November. It was the first of its kind in Nigeria. Our partner, NOI Polls, collects the data. The decrease was mirrored across three of the five sub-indices. Only one sub-index (workforce) recorded an increase. An index is produced in advanced economies such as by the Institute for Supply Management (ISM) in the US, larger EMs such as China, India and Russia, and a large number of emerging/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 to date has been 68.7 in December 2017 and our lowest 43.3 during lockdown in May 2020. In our unweighted model (that of the ISM), respondents are asked whether output, employment, new orders, suppliers' delivery times and stocks of purchases have increased over the previous month, are flat or have fallen. A reading over 50 (ex 100) denotes expansion for the sector.


On a 12-month moving average basis, the headline index rose from 50.7 in October to 51.0.


PMIs, unlike the national accounts, are forward-looking indicators. Neither in Nigeria is seasonally adjusted. PMIs move markets in advanced economies, which was evident during lockdown and the recovery in H1 '20.


The latest national accounts show that GDP grew by 4.0% y/y in Q3 '21, after a 5.0% growth in Q2, and compared to a -3.6% contraction in the year-earlier period.  Manufacturing posted a 4.3% y/y growth in Q3. Its largest segment (food, beverages, and tobacco) expanded by 6.1% y/y while its second largest (textile, apparel, and footwear) grew by 1.0%. Base effects were still visible. However, overall growth was supported by a strong performance of the non-oil sector which posted a solid growth of 5.4% y/y. The oil economy on the other hand recorded a contraction of -10.7% in Q3 despite coming from a low base of -13.9% in the year-earlier period.


The increase in the headline PMI posted last month was mirrored across all five sub-indices as the bustle around the festive season eclipsed manufacturers' initial weak outlook on year-end demand. Despite the slowdown in inflation over the past seven months, private consumption demand has remained soft.


The NOI surveys include trigger questions, which are put to respondents when they have given the same answer on a sub-index for two successive months and changed it for the third.  Based on our survey, the significant increase in headline reading resulted primarily from better access to raw materials, and increased demand associated with Q4 as the seasonal effect, on the back of end-year festivities, kicks in.


The reading for new orders, the most forward-looking of the five sub-indices, rose significantly from 50.5 to 62.0 last month, which reflected across all company sizes.


The most popular answer in our surveys is 'no change', accounting for over 50% of responses for all sub-indices. In employment and suppliers' delivery times, its share exceeded 85%.


China's official manufacturing PMI unexpectedly picked up last month as well, hitting 50.1 from 49.2 in October. This is its first increase in three months, supported by falling raw material prices and easing power rationing.   

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