The Manufacturing PMI in the month of April stood at 56.9 index points, indicating expansion in the manufacturing sector for the thirteenth consecutive month. The index
grew at a faster rate when compared to the index in the previous month.
The composite PMI for the non-manufacturing sector stood at 57.5 points in April 2018, indicating expansion in the non-manufacturing PMI for the twelfth consecutive month.
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 contracting.
The composite PMI for the manufacturing sector is computed as the weighted average of five diffusion indices, namely: production level, level of new orders, suppliers’ delivery time, employment level and raw materials inventory/work in progress,
with assigned weights.
In the April report, supplier delivery time, employment level and inventories grew at a
faster rate; while production level and new orders grew at a slower rate in April 2018.
The non-manufacturing sector is computed from four diffusion indices, namely: business activity, level of new orders, employment level and raw materials inventory, with equal weights of 25% each.
What this implies
The PMI report businesses are increasingly positive about the economy particularly those in the manufacturing and non-manufacturing sectors.
As businesses continue to grow positive about the economy this could translate to higher sales and volumes impacting positively on the bottom line.
For investors in stocks, this will impact positively on several consumer goods stocks listed on the stock exchange and further boost their revenue base.
Who should be happy
Investors who own the following stocks should be happy as this suggest businesses are confident of higher sales. Likewise, those in the manufacturing sector could also be positively affected.
Here are some of the stocks
Consumer goods like Nestle Plc, Unilever, Dangote Flour, Honeywell, Nigeria Breweries, Guinness, NASCON, PZ, Dangote Sugar etc.
Also, Manufacturing firms like Dangote Cement, WAPCO, CAP all listed on the Nigerian Stock Exchange should expect some positivity from this report.
Nestle Plc in its recently released Q1 2018 recorded a 10% growth in revenue from ₦61.151 billion in Q1 2017 to ₦67.463 billion in Q1 2018.
Dangote Cement in its Q1 2018 recorded a 16% surge in revenue from ₦208.16 billion in Q1 2017 to ₦242.1 billion in Q1 2018.
Unilever recorded a 16% increase in revenue from ₦22.172 billion in Q1 2017 to ₦25.817 billion in Q1 2018.