December rally eludes manufacturers
Nigeria’s manufacturing Purchasing Managers’ Index (PMI), a gauge for manufacturing sentiments, declined from 57.4 points in November to 55.9 points in December, according to data by FBN Quest and NOI.
Although, it is still above the 50 points benchmark. The contraction was unexpected, as experts noted that the festive season was supposed to boost manufacturers’ output.
“The trend is usually a further increase in headline rate for December due to a seasonal boost in demand resulting from year-end festivities,” analysts at FBN Quest stated in the monthly report.
The decline was due to the increased uncertainty among manufacturers on the back of the fast-spreading omicron variant of COVID-19 which was first reported to the WHO in late November.
Frank Onyebu, chairman MAN, Apapa branch, told BusinessDay that little information is provided regarding Omicron planted seeds of doubts and uncertainty among manufacturers, with hinting possibilities of another lockdown, restricted movement, reduced production, reduced product demand as consumer’s preference adjusts, among other things.
Furthermore, supply constraints remained a challenge despite the opportunity presented by the yuletide season to ramp up production activities.
Among the five sub-indices analyzed, the most common response was no change, which accounted for over 50 percent.
“The reading for new orders, the most forward-looking of the five sub-indices, declined from 62.0 to 60.5 last month, supported mainly by medium-sized firms,” it stated.
Despite manufacturers’ anticipation for increased product demand, the decline in new orders which used to perform well during the period shows that the decline in consumers’ purchasing power is more intense than before.
“Incomes did not grow, inflation was high and as such what consumers could afford last year or two years ago, they are not able to afford again,” Ayodele Akinwunmi, senior relationship manager, corporate banking group, FSDH Merchant Bank