Analysts attribute slower pace of manufacturing PMI on slowed growth in new orders, WIP inventory

The Manufacturing PMI in the month of May grew at a slower rate compared to the index in the previous month, but stood at 56.5 index points, indicating expansion in the manufacturing sector for the fourteenth consecutive month.

The slower pace of growth in the manufacturing segment has been hinged on the on slowed growth in new orders and WIP inventory by analysts at Cordros research.

Of the 14 sub-sectors surveyed, 10 reported growth in the review month in the following order: petroleum & coal products; paper products; plastics & rubber products; electrical equipment; food, beverage & tobacco products; cement; chemical & pharmaceutical products; primary metal; printing & related support activities; and textile, apparel, leather & footwear. The transportation equipment; fabricated metal products; nonmetallic mineral products; and furniture & related products subsectors declined in the review month.

According to a review of the PMI by Cordros Researchers, “business conditions remained healthy, with manufacturers and service providers reporting continued improvement in their overall operations, according to the Central Bank of Nigeria’s (CBN) Purchasing Managers’ Index (PMI) report for the month of May.”

The researchers noted that notwithstanding the modest cutback in the pace of growth, the indices remain instructive of positive output growth expectation in the second quarter of the year.

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‘By implication, we see a case for positive corporate performance in Q2-18, although we reckon the impact of that on investor sentiment may be offset by offshore players’ lingering concerns over both capital flow reversal in emerging markets and domestic political risks.

Again, the continued improvement in the survey result remained consistent with encouraging conditions in the overall economy.

The slowed growth in the non-manufacturing sector was underpinned by weaker expansion in three of the four major diffusion indices that constitute the composite index.

We reemphasize our position that there are no sufficient reasons to expect contracting PMIs over the rest of 2018, as the impact of the positive drivers supporting the encouraging figures deepens further.’

The Manufacturing and Non-Manufacturing PMI Report on businesses are based on survey responses, indicating the changes in the level of business activities in the current month compared with the preceding month.

The May 2018 PMI survey was conducted by the Statistics Department of the Central Bank of Nigeria during the period May 11 – 22, 2018.

The respondents were purchasing and supply executives of manufacturing and non-manufacturing organizations in 31 locations in Nigeria.