PMI drops sharply to 52.2 in August —Analysts
By Kayode Tokede
Analysts at Stanbic IBTC Bank have disclosed that Purchasing Manger Index (PMI) dropped to 52.2 in August from 55.4 in July.
According to analysts at Stanbic IBTC Bank, “ The headline figure derived from the survey is the 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.
“Meanwhile, purchase prices continued to rise sharply, although the rate of inflation softened from that seen in July.”
The report stated that 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.
According to the report, “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.
“New orders rose for the fourteenth month in succession during August which panellists 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 sub-sectors, 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 under pinned 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.”
