May 2, 2019

PMI reading no 73: in the comfort zone

Our manufacturing Purchasing Managers’ Index (PMI), the first in Nigeria, declined fractionally in April from 56.9 to 56.8. Our partner, NOI Polls, has gathered and compiled the data. The index is found in developed markets (such as the ISM’s in the US), larger emerging markets such as China, India and Brazil, and a few frontiers. It is based upon manufacturers’ responses to set questions on core variables in their businesses. In our case, it is not seasonally adjusted.

                                                                                                                  

  • In the unweighted model of our choice (the ISM’s), respondents are asked  whether output, employment, new orders, suppliers’ delivery times and stocks of purchases have improved on the previous month, are unchanged or have declined. A headline reading of 50 is neutral. We have posted twelve negative readings since our launch in April 2013, the most recent in July 2018.
  • Our sample is a representative blend of large, medium-sized and small companies, based across the country. Three sub-indices improved in April and all closed in positive territory, the highest being 60 for new orders.
  • The prevalent trend in April was an improvement in sentiment in large companies, matched by a deterioration among smaller firms. The proportion of unchanged responses continued to rise, to above 90% in one case.
  • Manufacturing is dominated by consumer goods industries, which remain under pressure from subdued household demand. In our search for glimmers of hope, we look ahead to the implementation of the new law covering the increased national minimum wage and the sign-off on the 2019 FGN budget, which has been approved this week by the Senate with minor modifications. We should stress that we see a pick-up off a low base.
  • Data from the Manufacturers Association of Nigeria show that Lagos State topped the table for manufacturing investment in 2018 for the second successive year. Ogun State’s previous no 1 position has been undermined by the poor condition of roads and the multiplicity of state taxes.
  • There were few revealing answers to our trigger questions because of the high proportion of unchanged responses.
  • On a 12-month moving average basis, the headline reading improved, for the first time since March 2018, to 54.0 in April.
  • Yesterday’s public holiday allows us to share the readings from China: these declined from 52.8 and 50.5 to 51.8 and 50.1 for the private-sector and government indices respectively.