Nigeria June PMI below neutral at 49.8%

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Nigeria’s Purchasing Managers Index (PMI) rose very marginally from 49.2 percent in May to 49.8 percent in June 2018, as reported by FBNQuest Research.

The research arm of the FBN holdings, in its headline PMI reading said most respondents, although a decreasing proportion, reported no change across the sub-indices.

“Our trigger questions show that seasonal effects (the rainy season) appear to have kicked in. Generally, logistics issues arise during the rainy season as manufacturers experience challenges with transporting their inputs for production as well as finished goods to consumers,” FBNQuest said in its report.

A composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding, 50 points indicates no change and any reading below 50 points indicates that it is generally contracting.
According to the Central Bank of Nigeria (CBN), the Manufacturing PMI Report on businesses is based on survey responses, indicating the changes in the level of business activities in the current month compared with the preceding month.

Meanwhile, in an earlier report by CBN last week Friday, 29 June 2018, Nigeria’s Purchasing Managers Index (PMI) expanded marginally in the month of June to 57.0 percent. This was 0.5 percentage points higher than the 56.5 percent reported for May.

According to the figures by the apex bank, the index expansion in June indicates fifteenth consecutive month of expansion in the manufacturing sector. The index for the month under review also grew at a faster rate when compared to the index in the previous month, as compiled from the CBN website.

The index performance in the 6th month of the year 2018 was linked to improved dollar liquidity and greater availability of raw materials, as the Central Bank of Nigeria (CBN) has continued to periodically inject dollar into the FX market. This has made the naira relatively stable in the H1 of this year, analysts noted.

A PMI is a simple exercise. A selection of companies are asked their view each month on core variables in their business. The respondent, who is characteristically the purchasing manager in a larger firm, has three possible replies: better, unchanged or worse than the previous month. According to the standard methodology, 50 marks a neutral reading and anything higher suggests that the manufacturing economy is expanding. Readings should be released at the very beginning of the new month, subject to public holidays.

FBNQuest said the five variables considered in turning out their report were; output, employment, new orders, delivery times from suppliers and stocks of purchases. They have equal weightings in their index, they stated.
“Our reports cover a representative sample of the sector with large, medium-sized and small firms. Any broad economic conclusions on the basis of our reports need to be tentative because we are operating in a near statistical void,”FBNQuest said.

In addition, FBNQuest said similar to previous months, consumer demand remained soft and manufacturers uncertain about consumption patterns, this was despite the obvious easing of inflationary pressures, as household demand is subdued.

Meanwhile, the rate at which the prices of goods and services increased in Nigeria moderated to 11.61 percent in May 2018, amid base effect, declining petrol prices and stable exchange rate, the lowest inflation rate in more than two years since March 2016.

This was 0.87 percent points less than 12.48 percent reported in April 2018. The Consumer Price Index (CPI) which measures inflation eased for the sixteenth consecutive months since January 2017, as gathered from the National Bureau of Statistics (NBS) figures.

Source: BUSINESSDAY

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