PMI Reading No 54: A Pause for Breath


Tuesday, October 03, 2017/9:36 AM/ FBNQuest Research

Our manufacturing Purchasing Managers’ Index (PMI), the first in Nigeria, is a little weaker in September at 58.1, compared with the previous month’s 58.5. Our partner, NOI Polls, has gathered and compiled the data. The index is a data release at the start of the calendar month in developed markets (such as the ISM’s in the US), the larger emerging markets such as China and a few other frontiers. It is based upon the responses of manufacturers to set questions on core variables in their businesses.

PMIs are forward-looking indicators of sentiment in all economies, and have the proven capacity to move financial markets in developed economies. To reinforce the point, the latest national accounts cover the second quarter (April-June) and the latest PMI the third month of the third.

In the unweighted model of our choice (the ISM’s), respondents are asked whether output, employment, new orders, suppliers’ delivery times and stocks of purchases have improved on the previous month, are unchanged or have declined. A headline reading of 50 is neutral. We have posted nine negative readings since our launch in April 2013, the last in January this year.

Our sample is an accurate blend of large, medium-sized and small companies.

We have also added “trigger” questions, which arise when the respondent has the same answer on a sub-index for two successive months and then changes it for the third.

Three of the five sub-indices picked up in September and all were in positive territory. The headline reading has been above 50 since March.

Among the sub-indices, we find a small improvement in output and a particularly strong reading of 60 for new orders. For employment there was a decline: this is the most stable reading, with close to four-fifths of respondents consistently reporting no change.

Nigeria has finally emerged from recession. Both GDP and manufacturing expanded by 0.6% y/y in Q2. At its recent AGM, the Manufacturers Association of Nigeria endorsed the FGN’s policies for the sector, noting improved access to fx (including the quarterly allocation of US$20,000 to SMEs) and the lifting of the ban on the export expansion grant.

The holiday weekend allows us to place Nigeria in the context of manufacturing PMI index readings for September elsewhere: 50.9 for Brazil, 51.0 and 52.4 for China (Caixin and official), 51.9 for Russia, 58.1 for the Eurozone and 60.7 for the US (ISM).

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