PMI Report: Manufacturing Tops Private Sector’s Growth in May

Dike Onwuamaeze

The Purchasing Manager Index (PMI) of the Stanbic IBTC Bank Plc for the month of May 2022 stated that the manufacturing sector topped the growth experienced by the Nigerian private sector during the month under review.

The report said that the PMI headline reading was 53.9 in May, which was a little lower than the 55.8 recorded in April but sustained a twenty-three successive monthly improvement in business conditions in Nigeria’s private sector. The headline figure derived from the PMI survey above 50.0 signaled an improvement in business conditions on the previous month, while readings below 50.0 showed deterioration.

It said: “All four of the monitored sub-sectors recorded marked expansions, led by the manufacturing sector. Services, wholesale and retail and agriculture followed behind, respectively.

“Business conditions in Nigeria’s private sector strengthened in May, but the rate of improvement slowed from April. Softer uplifts were recorded in output, new orders, purchasing activity and input inventories. That said, new orders continued to rise sharply which prompted a quicker expansion in headcounts. In turn, sentiment improved with companies also hoping that fruitful marketing campaigns would support output growth over the next 12 months.”

The Head of Equity Research West Africa at Stanbic IBTC Bank, Mr. Muyiwa Oni, who commented on the PMI, said: “The Stanbic IBTC PMI headline index touched lower to 53.9 in May from 55.8 in April, but it continued to indicate expansions in private sector activity. Growth was driven by increasing demand and output levels.

“Notably, the manufacturing sector has posted its strongest growth since October 2021. Output has expanded for 16 consecutive months in the sub-sector, averaging at 60.9 in 2021 compared to 62.3 so far this year.

“However, the manufacturing sector faces sharply rising diesel prices and insufficient FX supply. Average diesel prices rose 21 per cent month –on-month and 176 per cent year-on-year in April due to rocketing global energy prices.”

The report also noted sharp price pressures were once again evident during the month under review as “overall input price inflation was among the quickest in the survey’s more than eight years’ history.”

It said that “firms passed on higher expenses and sought to increase profit margins with output price inflation quickening in May,” adding that “larger workforces and higher prices for fuel, raw materials, transportation and other inputs led to another substantial increase in overall input prices in May. Moreover, firms raised staff wages at the third-strongest rate in the series history. Higher expenses were passed on to clients with selling price inflation quickening in May.”

Moreover, the report said that new orders rose sharply in May, albeit at a softer pace than in April as firms raised their output levels to extend the current run of output growth to 18 months.

Firms also continued to raise purchasing activity as companies were committed to raising their inventories as part of efforts to protect against future price hikes. According to the report, firms were also optimistic that their output levels would expand over the next 12 months.

“In fact, the degree of optimism improved from April. Firms reported that business expansions would support growth in output and as a result added to their headcounts. Staffing levels have risen in each of the last 16 months with the latest uptick the third-quickest in this sequence,” the report said.