4 JULY 2016-How bad is it? The fact that the Central Bank of Nigeria and the federal government admitting, after months of warning by economists, that the economy is really in recession leaves the hard questions about the country’s economic prospect unanswered.
That the Manufacturing sector’s composite PMI shrank to 41.9 index points in June 2016, faster than 45.8 in the preceding month means the market is taking a hard view on the prospect of the economy, at least in the short term. This number is the latest from the Central Bank of Nigeria, CBN. The National Bureau of Statistics confirmed the country’s GDP in Q1 2016 contracted by 0.36 per cent, the first negative growth in many years.
All the numbers don’t look good. Production levels in June fell from 47.9 in May to 40.2 in May. New export orders fell from 38.7 in May to 45.3 in June. Analyst consensus suggest continued drop, well into Q3, which would represent pessimism in the economy over the period.
The CBN admitted that the declines witnessed across board so far represents six consecutive months of decline. Production level, new orders, and employment level and raw material inventories declined at a faster rate; while supplier delivery time improved at a faster rate. In the non manufacturing sector, business activity, new orders and employment level dropped at faster rate while raw materials inventories declined at a slower rate, the CBN confessed.
Of the sixteen manufacturing sub-sectors, fourteen recorded decline in the review month in the following order: electrical equipment; non metallic mineral products; furniture & related products; fabricated metal products; chemical & pharmaceutical products; printing & related support activities; paper products; food, beverage & tobacco products; cement; computer & electronic products; plastics & rubber products; textile, apparel, leather & footwear; petroleum & coal products and primary metal.
The composite PMI for the non-manufacturing sector recorded decline for the sixth consecutive month. The index dropped to 42.3 points, indicating a faster decline compared to that in May 2016.
Of the eighteen non-manufacturing sub-sectors, fourteen recorded decline in June 2016 in the following order: construction; professional, scientific, & technical services; management of companies; utilities; accommodation & food services; real estate, rental & leasing; electricity, gas, steam and air conditioning supply; educational services; wholesale trade; public administration; information & communication; finance & insurance; repair, maintenance/washing of motor vehicles; and arts, entertainment & recreation.
The health care & social assistance sub-sector remained unchanged, while the remaining three subsectors recorded growth in the order: water supply, sewage & waste management; agriculture; and transportation & warehousing.
The key question does not concern the economy’s ability to rebound. It is whether the economy managers can find practicable policies that can lift confidence. The job of the policies makers now is not to revive the economy but to patch the damaging bruises the economy is taking.
