The latest Purchasing Managers’ Index (PMI) released by the Central Bank of Nigeria (CBN) shows that Nigeria’s manufacturing sector slowed down in June 2019.
According to the CBN’s PMI report, the Manufacturing PMI stood at 57.4 index points in June 2019, down from 57.8 points index recorded in the previous month. Meanwhile, even though the PMI index grew at a slower rate of 57.4 index point in June, the manufacturing sector still managed to expand for the twenty-seventh consecutive month.
Manufacturing PMI: The Central Bank report revealed that out of the 14 subsectors surveyed, 12 reported growth in the review month in the following order:
- Transportation equipment
- Petroleum & coal products
- Chemical & pharmaceutical products
- Electrical equipment
- Food, beverage & tobacco products
- Printing & related support activities
- Fabricated metal products
- Paper products
- Furniture & related products
- Textile, apparel, leather & footwear and
- Plastics & rubber products.
However, the nonmetallic mineral products and primary metal subsectors recorded declines in the review period.
Further analysis of the PMI shows that the production level index for the manufacturing sector grew for the twenty-eighth consecutive month in June 2019. The index indicated a faster growth in the current month when compared to its level in the month of May 2019.
- New Orders for the review period recorded 55.9 points. This indicates growth for the twenty-seventh consecutive month.
- Supplier Delivery Time index stood at 58.7 points in June 2019, indicating faster supplier delivery time.
- Employment Level index for June 2019 stood at 57.5 points, indicating growth in employment level for the 25th consecutive months.
- Raw material inventories index for the Manufacturing sector slowed down for the second consecutive months in June 2019.
Non-Manufacturing PMI: Just as the manufacturing sector slowed down, the non-manufacturing PMI equally indicated slower growth in June. The composite PMI for the non-manufacturing sector declined to 58.6 points as against 58.9 points recorded in the previous month. Meanwhile, Sixteen of the Seventeen surveyed subsectors
- Business Activity index ( 58.2 points from 59.2 points) grew for the twenty-sixth consecutive month, indicating slow expansion in nonmanufacturing business activity in June 2019.
- New orders index grew faster at 59.2 points index as against 58.6 points, new orders index grew for the 27th consecutive month in June 2019. Sixteen of the 17
surveyed subsectors recorded growth in new orders, while 1 declined in the
- The employment level Index for the non-manufacturing sector stood at 58.3 points, indicating growth in employment for the 26th consecutive month. Sixteen subsectors
recorded growth in employment level, while 1 subsector declined in the review
- Lastly, at 59.3 points, the non-manufacturing inventory index grew for the 25th consecutive months, indicating growth in inventories in the review period.
What the latest PMI means for the economy: PMI has become one of the most closely watched business surveys in the world, favoured by central banks such as the US Federal Reserve, European Central Bank, and Bank of England for providing the most accurate advance signals of changing economic growth and inflation.
Specifically, PMI is an extremely important indicator for international investors looking to form an opinion on economic growth. When it comes to predicting GDP growth, a higher than 42.0 PMI is considered to be the benchmark for economic expansion. However, a PMI below 42.0 could indicate that an economy is heading into a recession.
Analysis of growth data released by the National Bureau of Statistics (NBS) shows that the manufacturing sector recorded a decline of about N77.92bn in output in the first quarter of 2019. Hence, the slow in PMI means the slow growth recorded in Nigeria’s manufacturing sector may be sustained in the second quarter of 2019.