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  • Stanbic IBTC Bank Nigeria PMI: Softer Inflows of New Work Prompt Moderation in Private Sector Activity Growth in August

    Stanbic IBTC Bank Nigeria PMI: Softer Inflows of New Work Prompt Moderation in Private Sector Activity Growth in August

    Business conditions in Nigeria’s private sector improved modestly midway through the third quarter, but the rate of growth slowed to a six-month low.

     

    Softer upticks in output, new orders and employment contrasted with quicker expansions in held inventories as firms seek to take advantage of faster lead times, and protect against any future supply shocks.

     

    However, a loss of momentum in demand resulted in a dip in optimism. Sentiment was the third-weakest in the series history.

     

     Meanwhile, purchase prices continued to rise sharply, although the rate of inflation softened from that seen in July.

     

    The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI®).

     

    Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

     

     At 52.2 in August, down from 55.4 in July, the headline PMI registered a rate of growth that was the softest since February.

     

    New orders rose for the fourteenth month in succession during August which panelists linked to greater domestic demand.

     

    The rate of expansion eased notably from that seen in the previous survey period, however, with some firms mentioning that higher prices led to weaker sales growth.

     

    Consequently, firms raised their output levels at a softer pace, and one which was subdued in the context of historical data. Those firms increasing output mentioned higher customer numbers. Of the four monitored subsectors, two recorded growth.

     

     Manufacturers registered the steepest uptick, followed by wholesale & retail. Meanwhile, services saw a marginal decline, while agriculture recorded a sharp contraction.

     

    To cater for higher output levels, firms raised their headcounts marginally during the month. A further increase in staffing levels underpinned a solid reduction in outstanding business. In fact, backlogs fell at the fourth quickest rate in the series history.

     

    Quieter road conditions and prompt payments led to shorter delivery times in August. Quicker lead times allowed firms to add to their inventory holdings. Stocks of purchases rose at a sharp and accelerated pace which firms linked to efforts to protect against any future supply shocks.

     

    Turning to prices, higher raw material, commodity, and staff costs as well as unfavourable exchange rate movements led to a marked uptick in input prices. Firms looked to raise selling prices in a bid to protect profit margins.

     

    Finally, sentiment moderated to the third-weakest in the series. Panel comments suggested the longer-term economic implications of COVID-19 weighed on optimism.

     

  • Stanbic IBTC Bank Nigeria PMI: New order Growth Quickens to 17-Month High in June

    Stanbic IBTC Bank Nigeria PMI: New order Growth Quickens to 17-Month High in June

     

    June data revealed a positive end to the first half of 2021 with a solid expansion recorded in the Nigerian private sector. Greater client demand in both domestic and international markets led to a sharp and accelerated rise in new orders. That said, output, purchasing and employment growth softened during the month.

     

    Meanwhile, firms reduced their backlogs at the second most marked rate in the series. Sentiment regarding output in the year ahead was weak in the context of the historical average, but firms continued to foresee a rise in output by June 2022. On the price front, overall input price inflation was robust, but eased to the softest since December 2020 despite a sharper rise in purchase costs.

     

    The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI®). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration. At 53.6 in June, down from 54.4 in May, the headline PMI registered a solid rate of growth, but one which moderated from May’s nine-month peak. The latest uptick extended the period of expansion to 12 consecutive months, however. New order inflows rose strongly in June, with the pace of expansion quickening to the fastest since January 2020. Greater client demand was often mentioned by respondents.

     

    International demand for Nigerian goods and services also increased, and at the fourth-quickest rate in the series. Although client demand rose at a sharp and accelerated pace, output growth moderated in June. The rate of expansion was still solid but posted below the long-run series average. Sector data revealed services recorded the sharpest increase in activity followed by wholesale & retail and manufacturing respectively. Agriculture meanwhile registered a fractional rise. To support higher output, firms engaged in buying activity with growth now seen in each month since July 2020. Inventories also rose at a similar pace, though the rate of expansion softened in both.

     

    Workforce numbers rose marginally in June, which coincided with only a slight rise in staff costs. Amid efforts to keep on top of outstanding business, backlogs fell at the second most marked rate in the series, surpassed only by that seen in February. On the price front, higher raw material costs underpinned a rise in purchase prices which quickened to a three-month high. Overall input prices rose sharply, though at the softest rate since December 2020. Higher prices were passed on to clients, with the rate of charge inflation robust overall.

     

    Finally, firms remain optimistic about their output prospects over the year ahead, but the degree of positivity was far below the series average in June.