According to analysts, the latest Central Bank of Nigeria (CBN) Purchasing Manager Index (PMI figure for the month of June which stood at 57.0 index points improving from 56.5 index points in May, shows a positive economic growth for the economy.
“These numbers indicate positive economic growth. It is a recovery from the moderation in May. In April it was 56.9, in May it came down to 56.6 but there was a recovery in June to 57.0 When you talk about it in monthly basis, it indicates a recovery in economic activities because June number was higher. This also shows a strong signal around positive economic growth in Q2 2018,” Ibrahim Tajudeem, Head of Research, Chaphill Denham told BusinessDay on phone.
“So with this April, May and June PMI figures being above the 50 percent bench mark and by the time the National Bureau of Statistics (NBS) publishes the Q2 GDP, you should see a positive economic growth,” Tajudeem concluded.
A composite PMI above 50 points indicates that the manufacturing and non-manufacturing economy is generally expanding, 50 points indicates no change and below 50 points indicates that it is generally contracting.
The composite PMI for the non- manufacturing sector for the month of June stood at 57.5, a marginal increase from 57.3 May 2018.
Ayo Akinwunmi, Head of Research FSDH Merchant Bank said, “This is still in the expansionary territory which is good for the manufacturing and non-manufacturing sector of the economy. But it could have been better than this if the right policies are kept in place to ensure that it gets to the level that will stimulate the economy.”
The Manufacturing and Non-Manufacturing PMI Report on businesses is based on survey responses, indicating the changes in the level of business activities in the current month compared with the preceding month.
The composite PMI for the manufacturing sector is computed as the weighted average of five diffusion indices, namely: production level, level of new orders, suppliers’ delivery time, employment level and raw materials inventory/work in progress, with assigned weights of 25 percent, 30 percent, 15 percent, 10 percent and 20 percent, respectively.
The composite PMI for the non-manufacturing sector is computed from four diffusion indices, namely: business activity, level of new orders, employment level and raw materials inventory, with equal weights of 25 percent each.
The report stated: “Of the 14 subsectors surveyed, 10 reported growth in the review month in the following order: paper products; furniture and related products; printing and related support activities; food, beverage and tobacco products; plastics and rubber products; electrical equipment; textile, apparel, leather and footwear; chemical and pharmaceutical products; petroleum and coal products and non-metallic mineral products.”
It added that the transportation equipment; fabricated metal products; primary metal; and cement subsectors declined in the review month. Also, the report stated that at 59.2 points, the production level index for the manufacturing sector grew for the 16th consecutive month in June 2018.
Similarly, it stated that at 56.2 points, the new orders index for the manufacturing sector grew for the 15th consecutive month, indicating increase in new orders in June 2018.
The report indicated that composite PMI for the non-manufacturing sector stood at 57.5 points in June 2018, rising from 57.3 points in May, indicating expansion in the non-manufacturing PMI for the fourteenth consecutive month.
“We expect a mild recovery in the broader economy provided the current crisis in the country are resolved on time or else the economy is likely to experience the weak recovery that we are having now,” Akinwunmi said
