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Business activities continue to sustain the recovery from the recession levels seen early this year, latest Purchasing Managers Indicators (PMI) from both FBNQuest and the Central Bank of Nigeria (CBN) has shown.
The PMI figures from FBNQuest released early this morning shows a significant increase in October to 64.8. All the five sub-indices that make up the index were in positive territory with factory output having the highest PMI and workforce having the lowest, an indication that the economy is still having a jobless expansion.
The CBN PMI, both Manufacturing and Non-Manufacturing PMI are also in positive territory. The Manufacturing PMI came in at 55 index points in October, indicating an expansion in the manufacturing sector for the seventh consecutive month. Eleven of 16 sectors captured by the CBN PMI recorded an expansion in their activities.
The PMI for the non-Manufacturing sector was also in positive territory at 55.3 points, the sixth consecutive growth in the sector. Fifteen of the 18 sub-sectors measured in the non-manufacturing PMI recorded growth for the period.
According to analysts at FBNQuest, the October PMI figure “is the second highest reading recorded since the launch of our PMI in April 2013.”
“We attribute this very healthy reading to a boost in consumer confidence as well as seasonal effects ahead of the forthcoming festivities. Additionally, the CBN’s multiple currency practices (MCP), although unpopular in some quarters, have boosted foreign exchange liquidity and therefore the import-hungry manufacturing sector. Furthermore, there have been increased efforts towards local substitution for imported inputs (particularly for agro-processing manufacturers).”
They also noted that as “the end-year festivities draw closer there is increased cash circulation, pointing towards a boost in demand.”
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 are released at the very beginning of the new month, subject to public holidays.
FBNQuest PMI tracks five variables; output, employment, new orders, delivery times from suppliers and stocks of purchases. They have equal weightings in the index and cover a representative sample of the sector with large, medium-sized and small firms.
The national accounts, unlike a PMI, are a historical indicator. The latest series (for Q2 2017) shows an emergence from recession following five successive contractions. The economy grew by 0.6 percent year on year in the second quarter 2017. Oil GDP returned to positive growth at 1.6 percent year on year on the back of improved production. However, growth for non-oil GDP slowed marginally to 0.5 percent from 0.7 percent. Manufacturing achieved growth of 0.6 percent, compared with 1.4 percent the previous quarter. Food, beverages and tobacco, its largest segment, grew by 2.7 percent.
STEPHEN ONYEKWELU
