CBN’s PMI sees expansion in business condition, manufacturing sector in July
The Central Bank of Nigeria’s (CBN) Purchasing Managers’ Index (PMI) continued to show expansion in business conditions, as manufacturers and service providers confirmed sustained improvement in their overall operations.
That was highlighted by the PMI report for the month of July, with the headline manufacturing and non-manufacturing indices coming in at 56.8 (previously 57.0) and 57.7 (previously 57.5) respectively.
However, while noting the modest slowdown in the pace of expansion in manufacturing activities, analysts at Codros Capital say “the relationship between the PMI and GDP data has broken down recently”.
“A case in sight was the weaker-than-widely-expected Q1-18 GDP numbers (including weak non-manufacturing output growth), despite record-high PMI figures during the same period. That said, for what it is worth, the latest PMI reading fuels expectation of continued output growth into the third quarter of the year. For insight, the reported 56.8 and 57.7 manufacturing and non-manufacturing PMIs are both higher y/y by 270 bps and 330 bps respectively”.
Codros Capital market observers believe stronger national output growth will be instructive for the economy over the rest of the year in two major ways including on Monetary policy consistency and Positive corporate performance over H2-18.
Experts further argue 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. Specifically, analysts say CBN’s sustained commitment to forex stability, rebounding aggregate demand, a pickup in government spending, in line with the passed 2018 budget, and strengthening consumer expectation will be on a continuous rise after all.
Particularly on forex, suffice to say that confidence remained strengthened vis-à-vis the near-term outlook of the domestic currency considering the still-healthy state of the nation’s foreign reserves, which currently stands at USD47.2 billion, with oil prices staying strong at USD73.3/barrel, in addition to stable crude production.
