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Nigeria’s Purchasing Managers’ Index (PMI) declined 8 percent to 54.0 in May from 58.9 in April, the first such decline since January, according to data compiled by investment firm, FBN Quest.
PMIs are forward-looking indicators of sentiment, and have the proven capacity to move financial markets in developed economies. Respondents, who are primarily manufacturers, 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.
“Four of the five sub-indices declined in May. However, only workforce fell into negative territory while delivery times was the strongest at 64,” FBN Quest’s Gregory Kronsten and Chinwe Egwim said in a June 1 note.
“Among the answers to the trigger questions, we note seasonal effect (rainy season) as a primary reason for lower production. Large and medium-sized firms recorded significant declines in their stocks of purchases.”
PMI rose to a near three-year high in April, after successive upticks since January
Meanwhile, the CBN’s improved fx supply also resulted in a pickup in business confidence, according to Kronsten and Egwim. “However, macro challenges still persist and household pockets remain squeezed; as a result, demand is generally still soft.” The CBN is said to have sold $4 billion in four months, according to traders.
The Nigerian economy is emerging from recession after slumping last year for the first time in a quarter of a century.
In Q1 2017, the contraction of the economy narrowed from -1.3% y/y in the previous quarter to -0.5% while the manufacturing sector expanded by 1.4% y/y from a contraction of -2.5% in Q4 2016.
“Looking ahead to Q2 2017, we see growth of 1.6% y/y,” Kronsten and Egwim added.
FBN Quest has posted nine negative readings since its launch in April 2013, including five in 2016.
LOLADE AKINMURELE
