PMI reading no 67: another improvement

Our manufacturing Purchasing Managers’ Index (PMI), the first in Nigeria, picked up in October from 53.7 to 56.5. 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, unlike the national accounts, are forward-looking indicators of sentiment, and traditionally released on the first working day of the new month. They can 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 twelve negative readings since our launch in April 2013 including three this year.
  • Our sample is an accurate blend of large, medium-sized and small companies, based across the country.
  • Four of the five sub-indices improved, and all ended in positive territory. The proportion of unchanged responses declined for four of the five sub-indices. The employment readings have been the weakest of the five for the past three years. Firms of all sizes may raise their production and even see a pick-up in new orders but are wary of adding to the payroll.
  • The national accounts for Q2 2018 show that manufacturing growth slowed to 0.7% y/y from 3.4% the previous quarter. The growth of its largest segment (food, beverages and tobacco) slowed to 1.2% y/y from 5.5%. Among its larger segments, the best performer was cement (3.8% y/y), which we attribute to public infrastructure spending, real and anticipated.
  • The exercise 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. The most common explanations in this report are the approach of the dry season, the expectation that farmers will have more cash to spend,  and improved demand and access to raw materials.
  • The latest results of the few listed consumer goods companies (with an exception or two) may suggest otherwise but we hope that the third successive above-water headline reading shows that the sector is turning the corner. A reading of 57.5 for new orders is encouraging.


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