- Slides to 46.9 points, down for fifth month in a row
The recently released CBN’s Purchasing Managers Index (PMI) for the month of September, 2020 could be an early warning sign for the Nigerian economy of what lies ahead should the declining trend continue.
In the last five months the index has posted consecutive declines, a direction which mirrors the negative estimates seen in the gross domestic products (GDP) and employment numbers released recently.
The index printed 46.9 points for the month showing continuing contraction in the manufacturing sector. But month-on-month, the index rose by 0.4 basis points from the August index, which stood at 46.5; and 2.0 basis points from the July index, according to data released by Nigeria’s apex bank.
At 47.2 points, the production level recorded for the sector declined in September 2020 for the fifth month back to back. Five subsectors recorded expanded production level, one subsector stayed unaltered, while eight other subsectors recorded decreases underway in the month of September 2020.
At 46.4 index points, the new orders constricted for the fifth month back to back in the period under review. But despite the slow decline, six subsectors reported growth while the remaining eight subsectors recorded compression in the survey month.
On the other hand, the manufacturing sector’s supply delivery time index stood at 53.5 index points in September 2020 showing a faster time of delivery for the fifth month in a row. Although, six out of 14 subsectors surveyed recorded an improved delivery time, five reported unchanged points and the other three recorded a slower delivery time in the month of September.
The employment level list for September 2020 remained at 44.1 points, showing a decrease in employment level for the sixth month. Out of the 14 subsectors surveyed, three subsectors stay unaltered, two recorded expansion while the staying nine subsectors recorded lower employment level in the reported period.
Raw material inventories
On the other hand, the raw material inventories at 43.0 points, contracting for the sixth month in a row including September 2020. Four of the 14 subsectors recorded development in inventories while the other 10 subsectors recorded lower raw material inventories in the survey month
Non-manufacturing PMI report
The non-manufacturing segment PMI remained at 41.9 points in the month of September 2020, showing a contraction in the non-manufacturing division for the sixth month. Although, from the 17 studied subsectors, only water supply, sewage & waste management; arts, entertainment & recreation and professional, scientific, & technical services, reported growth above 50 points.
On the flip side, the remaining 14 subsectors (management of companies; repair, maintenance/washing of motor vehicle; agriculture; finance & insurance; electricity, gas, steam & air conditioning supply; accommodation & food services; information & communication; health care & social assistance; real estate, rental & leasing; educational services; wholesale trade; transportation & warehousing; utilities and construction) recorded decreases in the period under review.
Any sign from other economic indicators or the market?
The PMI is an extremely important indicator used by international investors who are looking to form an opinion on economic growth. To this end, recent numbers from the official statistics bureau have showed that headline inflation is on the rise on a month on month basis, with potential to mount pressure on the local currency.
Furthermore, during the second quarter of 2020, Nigeria recorded a constriction in its gross domestic product by 6.10 per cent as well as the rise in the unemployment figure in the same quarter of 2020; and coupled with the surprise pulled by the apex bank after it cut the policy rate by 100 basis points to 11.50 per cent, these have also seen investors and the market react. All these, as well as the continuous sliding of the manufacturing and non-manufacturing PMI are early signs for watchers of the Nigerian economy.