Business activity in Africa’s biggest economy has dropped to the lowest in five months, a new Purchasing Managers’ Index (PMI) has shown.
The latest monthly PMI by Stanbic IBTC Bank on Friday showed the headline index dipped to 50.2 in August from 51.7 in the previous month. Readings above 50.0 signal an improvement in business conditions, while those below show deterioration.
“Nigerian private sector business activity dipped into contraction midway through the third quarter of the year as severe and strengthening price pressures acted to diminish demand,” the index report showed.
It revealed that both overall input costs and output charges increased to the largest extent since the survey began almost a decade ago.
“Inflation again reflected higher transportation costs as a result of the removal of the fuel subsidy, plus currency weakness. Rising transportation costs also caused supplier delivery delays,” it added.
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The report revealed that August’s headline PMI was the lowest in the current five-month sequence of improving business conditions. “The index signalled only a marginal monthly strengthening of the health of the private sector.”
The PMI index, which measures the performance of the private sector, is derived from a survey of 400 companies from agriculture, manufacturing, services, construction and retail sectors.
It is a composite index based on five individual indexes with the following weights: new orders (30 percent), output (25 percent), employment (20 percent), suppliers’ delivery times (15 percent) and stock of items purchased (10 percent), with the delivery times index inverted so that it moves in a comparable direction.
May’s PMI index (54.0) saw the highest growth since the beginning of the year.