PMI Rises To 54.4 Points As Business Performance Improves

The Nigerian private sector grew by 54.4 basis points in May, with business conditions increasing to their highest level in nine months.

The Purchasing Managers’ Index (PMI) rose to 54.4 in May from 52.9 in April. The headline PMI increased at its fastest rate since August of last year, extending the current expansion streak to 11 months.

The PMI, conducted by Stanbic IBTC Bank, is the headline statistic obtained from the survey; numbers above 50.0 indicate an improvement in business conditions over the previous month, while numbers below 50.0 indicate a deterioration.

“The stronger improvement in the health of the private sector was centered on a robust rise in new orders, with the rate of growth reaching its highest level since last August,” according to the report. Meanwhile, exports increased at their quickest rate since February 2020.”

“With new business up sharply, firms increased output levels for the sixth month in a row,” it said. The most recent upswing was the most powerful in the preceding sequence, and it was in line with the series average.

“According to sub-sector PMI readings, manufacturers grew the fastest, followed by agriculture, services, and wholesale & retail, in that order. In the meantime, higher output requirements prompted more procurement and inventory holdings.”

Firms seek to raise their headcounts in order to meet rising demand. In May, the rate of expansion accelerated to a 35-month high. Firms were able to finish orders on time as a result of increased staffing levels, with backlogs dropping at the third-fastest rate in the study to date.”

“The Nigerian private sector business environment continues to show strong signs of improvement in May, as the PMI rose to 54.4, the highest print in nine months,” said Gbolahan Taiwo, an economist at Stanbic IBTC Bank.

According to Taiwo, for example, the relaxation of harsh public health regulations since the second quarter of last year has continued to pave the way for a wide macroeconomic rebound this year.

“This is very much in line with the persistent recovery we’ve seen in the PMI numbers since last year,” he continued. We expect the Nigerian economy to grow by 3.1% Y-o-Y this year, aided in part by reduced base effects from the contraction in the second and third quarters of 2020.

“Inflation remains high, and recent PMI series indicate that both input and output prices are rising. In view of stagnant wages, this could have an impact on the recovery of aggregate demand and consumer spending power.”

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