Business activity in Nigeria dropped to the lowest in seven months in June 2024, a new Purchasing Managers’ Index (PMI) has shown.
The latest monthly PMI by Stanbic IBTC Bank released on Monday showed the headline index fell to 50.1 from 52.1 in the previous month. Readings above 50.0 signal an improvement in business conditions, while those below show deterioration.
“June data signalled a broad stagnation of the Nigerian private sector as subdued demand and intense price pressures led to slowdowns in growth of output and new orders. In turn, employment rose only fractionally,” the report said.
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It said there were signs of inflationary pressures picking up, with purchase prices, staff costs, and selling charges all increasing more quickly than in May.
“Although new orders continued to rise in June, the rate of expansion was only marginal and the weakest in the current seven-month period of growth. There were some reports of underlying demand improving, but sharp price rises meant that customers faced challenges being able to commit to new projects,” the report added.
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.
“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.
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He said notably, new orders recorded a near-stagnation as new business increased only 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. In line with the picture for new orders, output rose at a slower pace during June, settling at its weakest level in four months.”
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