Steep price pressures acted to limit the pace of growth in the Nigerian private sector in July, 2023. Overall input costs rose at a pace unsurpassed in more than nine-and-a-half years of data collection, with selling prices up rapidly in response.
Rising price pressures impacted demand, with growth of both new orders and business activity softening as the second half of the year got underway. Meanwhile, business confidence hit a new low. There was more positive news on the employment front, however, as the rate of job creation quickened to the fastest since January.
The headline figure derived from the survey is the Stanbic IBTC Purchasing Managers’ Index™ (PMI®). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
The headline PMI posted above the 50.0 no-change mark for the fourth month running in July and thereby signaled a further improvement in business conditions in the Nigerian private sector during the month.
That said, at 51.7 the index was down from 53.2 in June and pointed to a modest strengthening of operating conditions that was the least pronounced in the current expansionary sequence.
The softer improvement in the health of the private sector reflected trends in output and new orders during July. In both cases, rates of growth eased to the weakest since the respective returns to expansion following the cash crisis at the start of the year.
While some firms reported having been able to secure new contracts amid rising customer numbers, others highlighted the negative impact on demand of rising prices. July data signaled a steep increase in overall input prices, with the rate of inflation the joint-fastest since the series began in January 2014, equal to that posted in November 2021.
Purchase costs were a key driver of overall input price inflation. Higher fuel costs following the subsidy removal and currency weakness were the main factors leading purchase prices to rise. Meanwhile, staff cost inflation hit a six-month high as firms increased pay to help staff deal with rising transport costs.
With input costs up rapidly, companies increased their output prices accordingly, and at one of the strongest rates on record. More than half of companies increased their charges over the month.
More positively, employment increased for the third month running in July, and at a solid pace that was the fastest since the start of the year. Backlogs of work continued to rise, however, as some firms reported delays while checks were made to make sure customers were able to pay for orders.
Input buying and stocks of purchases rose further, but rates of increase softened. Finally, business confidence continued to trend downwards in July and was the lowest in just over nine-and-a-half years of data collection.
