August PMI shows Nigeria’s economy in for more constrictions on pandemic

Charles Abuede

• PMI dips to 48.5 index points in August 2020
• Key sectors contracting for the fourth straight month in 2020

 As the Nigerian economy grapples with the attendant effects of the global pandemic, which has also resulted in a contraction of Nigeria’s gross domestic products (GDP), along with the wobbling of some key sectors of the manufacturing sector, the economy seems certain for more constriction through to the end of third-quarter based on the current purchasing managers’ index (PMI) for the month.

The manufacturing PMI, which is an economic measure of the prevailing trends in the manufacturing sector, for the month of August, stood at 46.5 index points, according to the Central Bank of Nigeria (CBN) data just released.

This indicates a contraction in the manufacturing sector for the fourth straight month as June and July recorded 42.1 and 44.9 points respectively.

The monthly survey conducted by the apex bank on 14 subsectors in the manufacturing sector revealed that out of the 14 sectors surveyed, 6 subsectors recorded growth above the 50 per cent threshold. It shows that non–metallic mineral product; cement; plastics & rubber products; transportation equipment; chemical & pharmaceutical products and textile, apparel, leather & footwear subsectors reported growth above the 50 per cent threshold during the period under review.

However, there was a contraction in the remaining 8 subsectors, with printing & related support activities; electrical equipment; petroleum & coal products; primary metal; furniture & related products; paper products; food, beverage & tobacco products; and fabricated metal products, all reporting a decline below the 50 per cent threshold.

Production Level

At 49.2 points, the production level record for the sector declined in August 2020 for the fourth month back to back. 5 subsectors recorded expanded production level, 3 stayed unaltered, while 6 subsectors recorded decreases underway in the month of August 2020.

New Orders

At 49.2 index points, the new orders recorded a slow decline for the fourth month back to back in the period under review. But despite the slow contraction, 6 subsectors reported growth, two subsectors stayed unaltered while the remaining 6 subsectors recorded compression in the survey month.

Supplier Delivery Time

Similarly, the manufacturing sector’s supply delivery time index stood at 53.0 index points in August 2020 showing a faster time of delivery for the fourth month in a row. Although 7 out of 14 subsectors surveyed recorded an improved delivery time, 2 reported unchanged points and the other 5 recorded a slower delivery time in the month of August.

Employment Level

The employment level list for August 2020 remained at 44.6 points, showing a decrease in employment level for the fifth back to back a month. Out of the 14 subsectors surveyed, 3 subsectors stay unaltered, 2 recorded expansion while the staying 9 subsectors recorded lower employment level in the reported period.

On the other hand, the Raw material Inventories at 46.1 points, contracted for the fifth month in a row, including August 2020. Four of the 14 subsectors recorded development in inventories, 2 (the petroleum and coal) stayed unaltered, while the staying 9 subsectors recorded lower raw material inventories in the survey month

Non-Manufacturing PMI Report

The non-manufacturing segment PMI remained at 44.7 points in August 2020, showing a contraction in the non-manufacturing division for the fifth sequential month. Although, from the 17 studied subsectors, only utility subsector reported unchanged level. On the flip, repair, maintenance/washing of motor vehicles; real estate rental & leasing; professional, scientific, & technical services; management of companies; electricity, gas, steam & air conditioning supply; educational services; health care & social assistance; finance & insurance; construction; arts, entertainment & recreation; transportation & warehousing; accommodation & food services; water supply, sewage & waste management; wholesale/retail trade; agriculture and Information & communication stood below the 50 per cent threshold in the survey month. The remaining 16 subsectors recorded decreases in the period under review.

Meanwhile, business activity continues its contraction for the fourth month in a row as it stood at 47.4 points in August 2020. Be that as it may, five out of the 17 subsectors announced growth in business exercises in August 2020, as the remaining 12 subsectors recorded a decline in 9 while 3 remained unchanged.

An upshot from the above data from the CBN implies that the economy has experienced bigger than expected contraction in the second quarter and 2 months into the third quarter of 2020.