The Manufacturing sector gained momentum in November as the manufacturing Purchasing Managers’ Index (PMI) rose to 50.2 points, after enduring six months of contraction due to the pandemic induced lockdown.
This was disclosed in the latest PMI report, published by the Central Bank of Nigeria (CBN).
According to the report, the manufacturing PMI rose to 50.2 points in November from 49.4 points recorded in October and 46.9 in September 2020.
The CBN report also disclosed that eight (8) out of the fourteen (14) surveyed subsectors, reported expansion (above 50% threshold) in the month under review in the following order:
- Transportation equipment
- Non-metallic mineral products
- Furniture & related products
- Textile, apparel, leather & footwear
- Plastics & rubber products
- Food, beverage & tobacco products
- Printing & related support activities
The remaining 6 sub-sectors reported contractions in the following order: Electrical equipment, Petroleum & coal products, Chemical & pharmaceutical products, Primary metal, Paper products, and Fabricated metal products.
Out of the eleven indices measured, production level, new orders, supplier delivery time, output prices, input prices, and quantity of purchases, expanded in November while the remaining five reported decline — employment level, raw materials/WIP inventory, new export orders, outstanding business/backlog of work, and stock of finished goods.
On the other hand, PMI for the non-manufacturing sector stood at 47.6 points in November 2020 — indicating slowing contraction in non-manufacturing activities.
Specifically, of the 17 surveyed sub-sectors, only three sub-sectors reported growth in the following order:
- Transportation & warehousing
- Health care & social assistance
while arts, entertainment & recreation; professional, scientific, & technical services; construction; repair, maintenance/washing of motor vehicles; utilities, water supply, sewage & waste management; real estate rental & leasing; accommodation & food services; finance & insurance; information & communication; wholesale/retail trade, educational services and electricity, gas, steam & air conditioning supply reported decline and management of company remained stationary.
What this means
PMI is a survey that is conducted by the Statistics Department of the Central Bank of Nigeria and shows the changes in the level of business activities in the current month compared with the preceding month.
For each of the indicators measured, this report shows the diffusion index of the responses, which is computed as the percentage of responses with positive change plus half of the percentage of those reporting no change, except for supplier delivery time, which is computed as the percentage of responses with negative change plus half of the percentage of those reporting no change.
A composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding. 50 points indicate that there is no change, while a PMI below 50 points indicates that it is generally contracting.
The boost in the manufacturing PMI indicates that the Nigerian manufacturing sector is recovering from the effects of the lockdown, implemented due to the COVID-19 pandemic, which saw many businesses halt operations and value chains disrupted.
Nigeria will hope to recover completely as it moves to turn around an impending economic recession.
Although, it is worth noting that the employment level still contracted in the month of November.