TUE, APRIL 3 2018-theG&BJournal-The March 2018 Purchasing Managers’ Index PMI data released last week by the Central Bank of Nigeria (CBN) energised economic watchers in Nigeria with most sharing bullish sentiment about outgrowth for the first quarter of 2018.
”It is difficult to expect contracting PMIs over 2018, as the impact of the positive drivers supporting the encouraging figures deepens further,” says CORDROS CAPITAL analysts.
The positive drivers supporting the encouraging figures, they noted, includes CBN’s sustained commitment to forex stability, rebounding aggregate demand, moderating inflationary pressure, stable energy prices and pickup in government spending has helped sustain confidence in the economy.
The manufacturing PMI improved further for the twelfth consecutive month, this time at a faster pace compared to the preceding month – 56.7 vs. 56.3. The faster pace of expansion in the manufacturing segment is attributable to accelerated growth in three of the major diffusion indices that make up the manufacturing PMI – production level (59 previously 57.8), new orders (56.1, previously 55.6), and WIP inventory (59.4, previously 58.1). The aforementioned helped mask slower expansion in supplier delivery time (56.6, previously 57.0) and employment level (53.3, previously 53.9).
The sustained stability of the naira exchange rate, coupled with the widely positive near-to-medium term outlook for the currency and aggregate demand, remains a major driver of the sustained expansion in the composite manufacturing PMI.
Of the 14 subsectors surveyed, 11 reported growth in the review month in the following order: electrical equipment; cement; petroleum & coal products; food, beverage & tobacco products; chemical & pharmaceutical products; fabricated metal products; paper products; transportation equipment; plastics & rubber products; textile, apparel, leather and footwear and primary metal. The remaining 3 subsectors contracted in the following order: nonmetallic mineral products; furniture & related products and printing & related support activities.
Similar to the manufacturing PMI, non-manufacturing PMI increased at a faster pace of 57.2 in March, compared to 56.1 in February. The faster growth in the sector reflects stronger improvement in business activity (58.7, from 55.6) and level of new orders (55.8, compared to 55.6 in February), both of which overshadowed slower growth in employment level (55.1, vs. 55.3 in the previous month) and inventory (59.2, below February’s 59.8).
Fourteen of the 16 subsectors recorded growth in the following order: public administration; utilities; finance & insurance; management of companies; agriculture; electricity, gas, steam & air conditioning supply; professional, scientific, & technical services; water supply, sewage & waste management; educational services; wholesale/retail trade; information & communication; real estate rental & leasing; health care & social assistance; accommodation & food services. The transportation & warehousing; and construction subsectors recorded contraction in the review period.
The latest data, in addition to halting two consecutive months of slowed expansion, strengthens the case that manufacturers and business owners’ optimism about the economy is stronger than it was a year ago. For instance, a year-on-year analysis shows that the improvement in business conditions is marked by 900 bps and 1,010 bps expansions in manufacturing (March 2017: 47.7) and non-manufacturing (March 2017: 47.1) PMIs.
”Juxtaposed with January and February data, the numbers under review, as a leading indicator, strengthen expectation for sustained output growth in the first quarter of 2018. For insight, the 56.8 average manufacturing PMI for Q1-18 is the highest quarterly figure within the scope of available data, while the 57.3 quarterly average for non-manufacturing PMI is second only to the 58.3 recorded in Q4-17, wherein we noted significant seasonality effect in December (62.1 vs. November’s 57.6).”
In addition analysts say they see the likelihood of positive corporate performance in Q1-1 and renewed interest in risky assets, amid stronger expectation for lower yields on government securities.
