PMI: Business confidence improves amidst worsening indices

The Purchasing Managers’ Index (PMI) survey report released by Central Bank of Nigeria for the month of August  showed faster expansions in both the manufacturing and non-manufacturing businesses despite the slower new order and new businesses indices.

According to the survey, the manufacturing composite PMI expanded to 57.9 index points in August from 57.6 reported in July 2019), showing  the 29th consecutive expansion. Despite the increase in manufacturing composite PMI, new orders

expanded slower to 57.1 within the reviewed period from 57.2 in June 2019 and forced producers to reduce their production – output production level index fell to 58.7 from 58.9 –, as sales slowed amid lower consumer disposable income.

Given the slow down in production output and faster supplier delivery time  index rose to 58.3 in August from 57.5 in July, raw materials/work-in-progress grew faster to 58.7 from 56.2 as the producers took advantage of cheaper prices of raw materials – input prices expanded slower to 57.0  from 59.5 to increase their stocks.

Also, manufacturers cut selling prices – output prices expanded slower, to 50.3 against 52.2 recorded in the preceding month– in order to push output which they did not succeed with given the slow down in new orders.

The Number of new hires recorded by manufacturers reduced in tandem with the lower production volume – the index for employment fell to 57.1 points in August compared to 57.3 repirted in July 2019. The non-manufacturing sector also recorded faster growth as its composite PMI expanded faster to 58.8 index points in August 2019 for 28 consecutive time from 58.7 index points in July 2019.

This was partly driven by faster expansion in business activity to 58.2 against  57.6 in the preceding month which necessitated the increase in inventory level to 59.8 from 58.9 recorded in July.

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