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August’s PM Index underscores contracting economic activities

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CBN Communique

For obvious reasons, the purchasing manager index (PMI) contracted further in August, expressing gloomy economic expectations of players in the manufacturing and services sectors.

Latest PMI report released today the Central Bank of Nigeria has it that the manufacturing PMI in the month of August stood at 48.5 index points, indicating contraction in the manufacturing sector for the fourth consecutive months.

However, of the 14 subsectors surveyed, six subsectors reported expansion at above 50 per cent threshold in the review month in the following order: nonmetallic mineral products; cement; plastics and rubber products; transportation equipment; chemical and pharmaceutical products; and textile, apparel, leather and footwear.

According to the CBN, the remaining eight subsectors, reported contraction in the following order: printing and related support activities; electrical equipment; petroleum and coal products; primary metal; furniture and related products; paper products; food, beverage and tobacco products; and fabricated metal product.

At 49.2 points, the production level index for the manufacturing sector showed contraction in August 2020 and for the fourth consecutive months.

Of the 14 subsectors surveyed, five subsectors recorded expansion in production level, three subsectors reported same level of production, while six subsectors recorded contraction in production in August 2020.

The report also identified new orders in the manufacturing industry which stood at 49.2 points, also showing a contraction in August 2020.

Six subsectors reported expansion in new orders, two subsectors maintained same level, while six recorded contraction in the review month.

In terms of delivery time, the manufacturing supplier delivery time index stood at 53.0 points in August 2020, indicating faster supplier delivery time for the fourth time.

Seven of the 14 subsectors recorded improved suppliers’ delivery time, two subsectors reported same level, while five sectors recorded slower delivery time in August 2020

More importantly, the employment level index for August 2020 stood at 44.6 points, indicating contraction in employment level for the fifth consecutive months.

As the apex bank gathered through the survey, out of the 14 subsectors, two subsectors recorded expansion in employment level in the review month; three subsectors recorded same level of employment, while the remaining nine subsectors recorded lower employment level in the review month.

Raw material inventories also contracted in the month under review, sustaining decline for the fifth month in August as it stood at 46.1 basis points

According to the latest report, four of the 14 subsectors recorded growth in inventories, the petroleum and coal subsector reported same level of inventories, while the remaining nine subsectors recorded lower raw material inventories in the review month.

Non-Manufacturing PMI Report

The PMI for the non-manufacturing sector stood at 44.7 points in August 2020, indicating contraction in non-manufacturing activities for the fifth consecutive months.

Of the 17 surveyed sub-sectors, only the utilities subsector reported same level, while the remaining 16 subsectors reported contracted in the following order: repair, maintenance/washing of motor vehicles; real estate rental & leasing; professional, scientific, and technical services; management of companies; electricity, gas, steam and air conditioning supply; educational services; health care and social assistance; finance and insurance; construction; arts, entertainment and recreation; transportation and warehousing; accommodation and food services; water supply, sewage and waste management; wholesale/retail trade; agriculture and Information and communication.

Generally, business activities declined to 47.4 points, for the fourth consecutive month, showing contraction in non-manufacturing business activity in August 2020.

Further details show that five out of the 17 subsectors reported growth in business activities (above 50 per cent threshold) in the review month; three subsectors reported same level, while the remaining nine subsectors recorded decline in business activity in the review month.

At 44.0 points, new orders index declined for the fifth time in August 2020. Three of the 17 subsectors reported growth in new order (above 50 per cent threshold) in the review month, two sectors reported same level, while the remaining 12 subsectors recorded decline in new orders in the review month.

In the non-manufacturing sector, employment level index stood at 44.3 points, indicating decline in employment level in August 2020.

Utilities subsector recorded same level of employment, while the remaining 16 subsectors reported decline in employment level (below 50 per cent threshold) in the review month.

Non-manufacturing inventory stood at 43.1 points, marking the fifth consecutive monthly decline. This indicates reduced inventories in the review period. The transport and warehousing subsector reported growth in inventory; the utilities sector reported same level of inventories, while the remaining 15 subsectors recorded decline in inventories in the review period

CBN: The August 2020 PMI survey was conducted by the Statistics Department of the Central Bank of Nigeria during the period August 10-14, 2020.

The respondents were purchasing and supply executives of manufacturing and non-manufacturing organizations in all 36 states in Nigeria and the Federal Capital Territory (FCT). The bank makes no representation regarding the individual companies, other than the information they have provided.

NOTE: The Purchasing Managers’ Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing and service sectors.

It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting.

The purpose of the PMI is to provide information about current and future business conditions to company decision makers, analysts, and investors.

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