Nigeria’s manufacturing index expansion slows in August as economy comes out of recession

The manufacturing purchasing managers’ index (PMI), an indicator of the economic health of the manufacturing sector, declined marginally to 53.6 index points in August 2017 from 54.1 in the previous month, indicating a slowdown in the expansion rate in the manufacturing sector, which began in the past five months, a Central Bank of Nigeria (CBN) PMI report for the same month just released has shown.

“The Manufacturing PMI stood at 53.6 index points in August 2017, indicating expansion in the manufacturing sector for the fifth consecutive month,” the CBN noted.

The index report is a familiar data released at the start of the calendar month in developed markets such as the ISM’s in the US. It is based upon the responses of manufacturers to set questions on core variables in their businesses.

The CBN report indicated that 12 of the 16 sub-sectors reported growth in the review month in the following order: computer & electronic products; appliances and components; chemical & pharmaceutical products; textile, apparel, leather and footwear; electrical equipment; printing & related support activities; paper products; nonmetallic mineral products; food, beverage & tobacco products; furniture & related products; cement and plastics & rubber products.

The remaining four sub-sectors contracted in the order: transportation equipment; primary metal; petroleum & coal products and fabricated metal products.

CBN says the report is based on survey responses indicating the changes in the level of business activities in the current month compared with the preceding month, that for each of the indicators measured, the report shows the diffusion index of the responses.

Specifically, production level index for the manufacturing sector is reported to have grown for the sixth consecutive month in August 2017.

The index at 57.4 points, increase in production at a slower rate, when compared to its level in the preceding month.

Eleven of the 16 manufacturing sub-sectors recorded increase in production level, one remained unchanged and the other four declined during the review month with new orders index at 52.7 points, growing for the fifth consecutive month. Six subsectors reported growth; one remained unchanged while the remaining nine contracted in the review month.

According to the report, the supplier delivery time index for the manufacturing sector stood at 52.0 points in August 2017, rising for the third consecutive month. Nine sub-sectors recorded improved suppliers’ delivery time, 2 remained unchanged while 5 sub-sectors recorded delayed delivery time.

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Manufacturing employment level index equally grew in the month under review. At 51.5 points, the index indicated a slower growth in employment level for the fourth consecutive month than the previous month. Of the sixteen sub-sectors, seven recorded growth, four remained unchanged while the remaining five sub-sectors recorded decline in employment level over the preceding month.

At 53.6 points, the raw materials inventory index grew for the fourth consecutive month, and at a faster rate compared to its level in June 2017. Eleven of the sixteen sub sectors recorded growth; two recorded no change while three sub-sectors recorded decline in raw materials inventory.

However, the non-manufacturing PMI report indicates that business activity and new orders grew at a slower rate, while employment level and inventories grew at a faster rate in August 2017.

The composite PMI for the non-manufacturing sector stood at 54.1 points in August 2017, indicating growth for the fourth consecutive month.

Of the 18 non-manufacturing sub-sectors, 15 recorded growth in the following order: utilities; public administration; information & communication; finance & insurance; health care & social assistance; agriculture; accommodation & food services; electricity, gas, steam & air conditioning supply; transportation & warehousing; repair, maintenance/washing of motor vehicles; wholesale trade; educational services; professional, scientific, & technical services; arts, entertainment & recreation; and water supply, sewage & waste management.

The real estate, rental & leasing; construction; and management of companies sub-sectors recorded contraction in the review period.

Specifically, the business activity index moderated to 56.1 points in August 2017, indicating growth for the fifth consecutive month. The index grew at a slower rate, when compared to its level in the previous month.

Twelve sub-sectors recorded growth in business activity, three remained unchanged while three declined in the review month.

The PMI expansion for the past five months, according to analysts, is a clear indication that the economy is finally emerging from recession.