According to the latest report for manufacturing Purchasing Managers’ Index, PMI, compiled by FBNQuest Research, an arm of FBN Merchant Bank Limited, the index saw a recovery from 50.6 in February to 54.4 for the month of March 2016.
Manufacturing PMI tracks operating environment of factories within a given period, usually one month, with information based on the responses of manufacturers to set questions on core variables in their businesses.
According to the research report only employment, one of the five sub-indices, was negative in March.
The strongest reading was 61 for output, up from 53 recorded in February. “We link the marked recovery in the output sub-index from 53 in February in part to a smaller improvement for stocks of purchases.”
Even at that it appeared that large sized manufacturers are still in difficulties as the favourable index was recorded among small and medium scale organizations.
“It was limited to small and medium-sized companies. For the large and more import dependent firms, there was actually a decrease in March”, the report stated.
Moreover, the analysts at FBNQuest said that access to foreign exchange did not improve in the month under survey, a situation which had been prevalent in the past six PMI reports. “In these circumstances, we would expect companies to turn to local inputs, where available. Small firms would normally take the lead in this process, given their greater flexibility in production”, the report stated.
According to FBNQuest analysts “the fact that the employment sub-index was below water for the fourth successive month tells us that respondents do not see a bright near term. “They have pushed up production because other factors allowed it but are not rushing to increase their payrolls.”
National accounts for fourth quarter 2015 showed that manufacturing expanded marginally by 0.4 per cent year-on-year, compared with the contraction of -1.8 per cent year-on-year in third quarter. “We caution that the first quarter tends to be the weakest for growth in the year, not least because of delays in the release of funds from the budget for capital spending.
“The agenda of the current administration is driven by its expansionary budget for 2016, which the Senate last week approved”. FBNQuest PMI is the first of such index in Nigeria, but the National Bureau of Statistics, NBS, has also taken up research on manufacturers PMI.
The index is a familiar data release at the start of the calendar month in developed markets such as the United States of America with the Institute of Supply Management, ISM, issuing its lead PMI, world’s oldest and most popular PMI. FBNQuest PMI is modeled after the ISM.
