A few reasons why the latest PMI numbers should excite you
Nairametrics| The Central Bank of Nigeria has released its Purchasers Managers Index (PMI) for April 2017. According to data from the CBN, Manufacturing PMI rose to 51.1 index points in April 2017, indicating expansion in the manufacturing sector after three months of contraction.
A composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding, 50 points indicates no change and below 50 points indicates that it is generally declining.
Why is this important
- If manufacturing and non-manufacturing PMI can stay higher than 50 points in the next few months, then hopes of a stronger GDP growth rate could materialise in the third and fourth quarter respectively.
- In the fourth quarter GDP report released by The National Bureau of Statistics, Manufacturing GDP contracting in real terms by about 4.32% in 2016. Most of the components of that sector reported marginal improvements in the survey for manufacturing PMI
- An immediate effect of a steady PMI above 50 points is an indicator that some of the jobs lost at the height of the recession might just return in the months to come.
- The employment index does show a 16-consecutive month decline in manufacturing and non-manufacturing PMI, however the rate of decline is slowing.
- A better positive outlook for the economy is also a trigger for foreign investors to return to Nigeria, sparking up an increase in asset prices that have for long remained depreciated.
- This could also have a positive effect on the exchange rate, even though the gains could be erased by a renewed demand for forex to pay for raw materials input.