Nigeria’s Purchasing Managers’ Index (PMI) dropped to a seven-month of 50.1 in June as inflationary pressures led to a slowdown in business activities in the month.
According to the Stanbic PMI for June, the private sector recorded stagnation in June due to subdued demand and a decline in output and new orders.
The increase in prices during the month under review resulted in customers not investing in new projects as companies increased selling prices in line with the same pace of inflation.
The sharp rise in output prices matched a quicker increase in input costs. Purchase price inflation occurred due to currency weakness and higher raw material costs, especially for animal feed.
Additionally, efforts to assist workers with increased living and transportation costs led to a substantial rise in wages.
The report states, “June data signalled a broad stagnation of the Nigerian private sector as subdued demand and intense price pressures led to slowdowns in growth of output and new orders. In turn, employment rose only fractionally. There were signs of inflationary pressures picking up, with purchase prices, staff costs and selling charges all increasing more quickly than in May.”
“The headline PMI registered only fractionally above the 50.0 no-change mark in June to signal broadly unchanged business conditions at the end of the second quarter. At 50.1, the index was down from 52.1 in May and the lowest in seven months.”
Furthermore, the agricultural and manufacturing sectors recorded the quickest pace of increase in business activities despite output growth at the slowest pace in four months.
In June, business confidence in Nigeria remained near record lows. Optimism among firms was tied to plans for business expansion, securing new funding, and export efforts.
Speaking on the report, the Head of Equity Research at Stanbic IBTC, Muyiwa Oni stated, “The PMI reading in the quarter is consistent with a likely slowdown in non-oil sector’s growth to 2.6% y/y in Q2:24 from 2.8% y/y in Q1:24. Nonetheless, headline inflation is likely to peak in June, with moderation expected in H2:24 as the year-on-year effects of PMS subsidy removal (which induced higher fuel prices) and significant currency depreciation (which accompanied the FX unification) fade. In addition to the commencement of the primary harvest season in September, this is likely to provide some respite for consumers in H2:24.”
What you should know
Nigeria’s May inflation rose to 33.95% and the exchange rate closed the month of June at N1503/$– marking a 40% depreciation in the first half of the year.
Furthermore, the NBS reported a renewed increase in prices of staple food items rising by over 30% month-on-month.