The latest report for the manufacturing Purchasing Managers’ Index (PMI) measured by FBN Capital shows a small retreat in the headline reading from 54.6 in August to 53.2.
Data for the exercise is compiled by NOI Polls.
The index is a familiar release at the start of the calendar month in developed markets (such as the ISM in the US), the larger emerging markets like Brazil and China, and a few other frontier markets such as Vietnam.
The index is based on the responses of a number of manufacturing companies to set questions on core variables in their businesses. It is unweighted.
In the model chosen (the ISM’s), they were asked whether output, employment, new orders, suppliers’ delivery times and stocks of purchases have improved, are unchanged or have declined. They were asked to make allowances for seasonal factors in their responses. A reading of 50 is neutral.
The sample is a representative blend of large, medium-sized and small companies.
According to statement by FBN Capital, “We have seen several pronounced swings since we launched our index in April 2013 and only once was there a negative headline reading (49.4 in July 2013). In our view these are consistent with Nigeria’s frontier market status. Changes in the operating environment such as access to electricity, fuel and credit, as well as swings in business confidence, help to explain these movements.”
The new national accounts (base year 2010) show manufacturing growth of 14.0% y/y in Q2 2014. These stellar growth figures for the sector may cause a few heads to turn yet are consistent with the rapid, consumption-led transformation of a frontier market.
The statement said, “We see the small decline in the headline index in September as within the margin for error for a frontier market. Unusually, the reading for output picked up to 46 while that for new orders slowed to 57. That for the workforce also slowed, to 50. The curiosity is that the readings for all three sub-indices were firmer for medium-sized companies.”
