PMI reading no 63: fractionally under water

Our manufacturing Purchasing Managers’ Index (PMI), the first in Nigeria, picked up gently in June from 49.2 to 49.8. 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.


  • PMIs are forward-looking indicators of sentiment, and have the proven capacity to move financial markets in developed economies.
  • 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 now posted eleven negative readings since our launch in April 2013.
  • Our sample is an accurate blend of large, medium-sized and small companies, based across the country.
  • Two of the five sub-indices declined in June, with three now in negative territory (output, employment and stocks of purchases).
  • There was more fluidity in this latest report, and the proportion of unchanged responses, while still the largest category, fell by 20 percentage points for most sub-indices.
  • Manufacturing appears to have settled on a plateau, and respondents to be sitting on the proverbial fence. The sector has access to freely available fx as a result of the CBN’s reforms in H1 2017. However, it is unsure of demand growth.
  • The exercise also includes questions triggered when a respondent has given the same answer for a sub-index for two successive quarters and then changes it for the third. In this report, explanations for declines in readings include: the rainy season, stiff competition domestically and from China, and soft demand due to pressures on purchasing power.
  • The report is consistent with most of the results reported by listed non-bank companies for Q1 2018. It is also consistent with the nature of the economy’s emergence from recession, which has been largely driven by the recovery in oil output. The non-oil economy expanded by just 0.8% y/y in Q1, and so well below the rate of annual population growth (estimated at +/- 2.8%).

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