The United States Federal Reserve is expected to meet on Wednesday, where it will likely hold interest rates steady for the seventh straight time while Stanbic IBTC sets to publish Nigeria’s Purchasing Managers’ Index (PMI).
Wednesday, July 31
Fed meets to hold rate decisions
The Federal Open Market Committee (FOMC) will be meeting on Wednesday for rate decisions with anticipations of maintaining rates for the seventh consecutive time.
Many analysts expect the Fed to hold rates steady at a target of 5.25 percent to 5.50 percent as the Fed still waits for inflation to ease a bit more.
The FOMC serves as the monetary policy-making arm of the Federal Reserve System, and its decisions have far-reaching implications for the U.S. economy and economies whose currencies are pegged to the US dollars.
Read also: Stanbic IBTC to issue Nigeria PMI as US awaits unemployment data
The US consumer price index fell to 3 percent in June compared to the previous rate increase of 3.3 percent, according to U.S. Labour Department data. But it’s still lower than the 2 percent target of the Fed.
Economists polled by Reuters are however optimistic that the FOMC may lower rates by 25 basis points in their meetings in September and December.
Thursday, August 1
Stanbic to release July PMI report
Stanbic IBTC will be releasing its Purchasing Manager Index on Thursday.
In June, of 400 private sector companies in Nigeria, close to 60 percent posted a rise in input costs, the PMI report showed.
It stated that in line with the trend in input costs, companies increased their selling prices sharply again in June.
“The pace of inflation quickened slightly from that seen in May,” the report said.
It added that subdued demand and intense price pressures affected business activity in Africa’s most populous nation, as it fell to the lowest in seven months.
The headline index fell to 50.1 in June from 52.1 in the previous month. Readings above 50.0 signal an improvement in business conditions, while those below show deterioration.
“Many analysts expect the Fed to hold rates steady at a target of 5.25 percent to 5.50 percent as the Fed still waits for inflation to ease a bit more.”
“The Stanbic IBTC headline PMI dropped to a seven-month low of 50.1 points in June from 52.1 in May due to moderation in domestic demand amid the intensification of price pressures, leading to slowdowns in growth of output and new orders,” Muyiwa Oni, head of equity research West Africa at Stanbic IBTC Bank, said in the report.
“Notably, new orders recorded a near-stagnation as new business increased marginally and at the slowest pace in the current seven-month sequence of expansion. Besides, financial challenges at customers reportedly limited the ability of firms to fully benefit from any improvement in underlying demand,” he added.
Nigerian protests are likely to disrupt economic activities
There is a high potential for clashes between protesters and security personnel as security forces prepare to prevent the escalation of the planned nationwide protest against hardship, a report by Beacon Security and Intelligence Limited says.
Several groups have announced plans to begin anti-government demonstrations dubbed ‘10 days of rage, #EndBadGovernance’, to address the soaring cost of living.
However, Beacon Security and Intel, in their incident report titled “Nationwide protest “End Bad Government in Nigeria 2024” from August 1–10, 2024,” anticipate that the demonstration is anticipated to garner participation from a diverse range of regions, ethnicities, and religious groups across Nigeria.
Key cities expected to be major hotspots include the Federal Capital Territory (FCT), Lagos, Ogun, Kano, Edo, Enugu, Rivers, and Kaduna.
Read also: Nigeria’s PMI expansion signals stronger economic growth in Q1
The security and risk management firm urged Nigerians to stock up on food and other essentials ahead of the demonstration stated for August 1 to 10.
Nigeria is currently contending with a record high inflation rate of 34.19 percent in June 2024 due to the two-time devaluation of the naira and the removal of petrol subsidies.
The inflationary trends have raised Nigeria’s interest rates by a combined 800 basis points from 18.75 percent last July to 26.75 percent as the central bank continues to deploy monetary tools to restore the battered economy.
Food inflation, which constitutes the largest percentage of the headline inflation, is currently 40.87. The cost of energy and transportation has skyrocketed in the last year, making life difficult for the masses.
Friday, August 2
US statistics agency to release unemployment rate
The US Bureau of Labour Statistics will be releasing its unemployment data for July 2024 on Friday.
The unemployment rate ticked higher to 4.1 percent in June, compared to 4.0 percent last month. This is however lower than the long-term average of 5.69 percent. The forecast had been for the jobless rate to hold steady at 4 percent.
The jump in the unemployment rate in June reflected a further decline in household employment.
The mixed report boosts the odds that the Federal Reserve will start cutting interest rates in September as the labour market remains fairly tight.
The unemployment rate measures the percentage of the total workforce that is not working yet actively seeking employment.
A reading that is higher than forecast is generally negative for the USD, while a lower than forecast reading is generally supportive for the USD.
Read also: Project management skills equip women with versatile toolkit – PMI
Naira remains weak as FX reserves swell
The naira is yet to see gains even as Nigeria’s foreign reserves saw some steady rise, fanning hopes for more confidence in the economy.
The external reserves rose to a 17-month high of $37.05 billion in July 2024, a development likely to boost investors’s confidence.
The last time Nigeria had reserves slightly above $37 billion was February 2023, exactly 17 months ago, according to the Central Bank of Nigeria (CBN) data.
But this is yet to reflect on the naira, as the local currency plummeted to N1,603.80 last Thursday at the official market after holding steady at N1,500 for over a month.
The naira was sold between N1,650 and N1,680 at the parallel market, also known as the black market.
Analysts are betting on the naira to maintain the N1,500-NN1,600 range given the various interventions of the central bank in the foreign exchange market.
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