PMI expands sluggishly to 56.2 points in September

The Purchasing Managers Index (PMI) of the manufacturing sector of the economy expanded by 56.2 index points in September. This represents a 0.9 index points difference compared to the 57.1 index points reported in August 2018.

The figures released yesterday by the Central Bank of Nigeria (CBN) indicates expansion in the manufacturing sector for the eighteenth consecutive month. Although for the same month under review, of the 14 subsectors surveyed, 10 reported growth in the review month. This is compared to the 13 sub-sectors that reported growth in the previous month

“The index however grew at a slower rate when compared to the index in the previous month,” the Apex bank said in the PMI Survey Report published on its website.

A composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding, 50 points indicates no change and below 50 points indicates that it is generally contracting. The subsectors reporting growth are listed in the order of highest to lowest growth, while those reporting contraction are listed in the order of the highest to the lowest contraction.

Analyst however see the slow expansion index as a signal that the 2018 third quarter Gross Domestic Product (GDP) figures may be weak.

“The PMI data is the most credible data of what Q3 GDP might look like and with the most recently released data, there is an increasing likelihood that the headline might come out below expectation. Nonetheless, since it is above fifty they suggested that there was still an expansion but it was rather slower,”Rafiq Raji, the chief economist at Macroafricaintel Investment told BusienssDay.

“We would not be surprise to see the economy grow at a slower pace in Q3:2018 relative to Q2:2018 due to the delay in the implementation of the 2018 budget. We have not seen any drastic policy announcement to bolster economic performance in Q3:208 especially for the manufacturing sector,” Ayodeji Ebo, managing director, Afrinvest Securities limited had earlier said.

Also responding to the report Ayo Akinwunmi, Head of Research at FSDH Merchant bank said “So for me it still what we have been discussing, the slow expansion rate slows down the activity in the country.”

Meanwhile, figures recently released by the National Bureau of Statistics (NBS) announced that Nigeria recorded national output of N16.58trillion, representing a growth of 1.50 percent in the second quarter (Q2) of the year. This marks the second consecutive quarter of decline in the pace of economic growth in the country as a decline in oil sector growth hurt the pace of economic expansion.

Growth in Q2 2018 was –0.45 percentage points slower than 1.95 percent recorded in the first quarter of 2018, although it was 0.79 percentage points higher when compared to the second quarter of 2017 which recorded a growth of 0.72 percent.

In the quarter under review, aggregate GDP stood at N30.69 trillion in nominal terms. This represents a 7.85 percent increase in nominal GDP when compared to the preceding quarter (N28.46 trillion) and 13.57 percent increase when compared to the corresponding quarter of 2017 (N27.03 trillion).

A breakdown of the PMI report for September showed that the subsectors that reported growth in the period under review were: Electrical equipment; Printing & related support activities; Transportation equipment; Nonmetallic mineral products; Chemical & pharmaceutical products; Fabricated metal products; Furniture & related products; Textile, apparel, leather & footwear; Food, beverage & tobacco products; and Plastics & rubber products.

While on the other hand, the Petroleum & coal products; Cement; Paper products; and Primary metal subsectors declined in the review month.