• Friday, March 29, 2024
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Why manufacturing PMI slumped in January

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The Manufacturing Purchasing Manager Index (PMI), an indicator of economic health for the manufacturing sector, slumped by 2.6 points to 58.5 index points in the first month of 2019, compared with 61.1 index points in December 2018.
The decline is attributable to the slower rate of expansion due to lower production level and new orders as well as destocking of inventories, according to analysts at CSL Stockbrokers.
They positioned that the slow down in production level was driven by weaker demand on the back of high rate of unemployment and inflationary pressures.
The PMI report showed that all 14 sub-sectors recorded growth in the period under review.
According to them, the slump in manufacturing PMI signals a waning momentum that characterises business activities at the beginning of a new year. All the sub-indices of the overall manufacturing PMI contracted when compared with December figures.
Production level PMI sank by 4.3 points to 59.3 index points. New orders PMI depreciated by 3.4 points to 63.6 points. Suppliers’ delivery time PMI fell by 3.4 points.
Employment level and Raw materials/Work-in-Progress PMIs depreciated by 0.6 and 3.3 points to 56.4 and 59.9 index points, respectively.
On year-on-year basis, manufacturing PMI inched higher by 1.2 points compared with 57.3 index points in the corresponding month of 2018.
Giving reasons for the decline in manufacturing PMI, Olayinka Olohunlana, a Lagos-based economic and financial analyst, attributed the decline to infrastructural deficiency in the sector, which had marred them from producing at full capacity.
“It would be a daunting task for any manufacturing firm to produce at optimal level without having adequate infrastructural facilities in place,” she said on phone.
According to Olohunlana, infrastructural deficiency heightens production cost and hampers business profitability, which is exactly what Nigerian manufacturers are currently facing.
This upheld the claim of the Manufacturing Association of Nigeria (MAN) that Nigerian manufacturers expended N246.38 billion on private power generation in two years owing to the poor state of public power supply in the country.
According to MAN, Nigerian manufacturers incurred N129 billion in 2016, N117.38 billion in 2017 and N43 billion in the first six months of 2018.
Non-manufacturing PMI stood at 60.1 points in the reviewed period, indicating 2.2 points decline compared with 62.3 points in December 2018.
On year-on-year basis, Figure for Non-manufacturing PMI for January 2019 inched higher by 1.6 points as against 58.5 points a year earlier.
Out of the 17 non-manufacturing sectors captured in the survey, 16 recorded growth except management of company subsector that remained unchanged during the review period.
The four non-PMI sub-indices weakened when compared with December figures. Business activity PMI sank by 3.5 points; Level of new order PMI dip by 2.9 points.
Employment level and Inventory level PMIs depreciated by 0.2 and 2.2 points respectively.