The CBN’s Purchasing Managers’ Index (PMI) report for December, which was released last week, indicated an expansion in both Manufacturing and Non-Manufacturing sectors. The sustained improvement in PMI readings cannot be dissociated from the launch of the Investors’ & Exporters’ (I&E) FX window in April 2017, as this spurred improved liquidity and stability in the FX market against the backdrop of increased oil prices and higher external reserves.
Manufacturing PMI expanded for the 9th consecutive month, increasing 3.4pts from 55.0pts recorded in November to 59.3pts in December – the highest level since the survey began in July 2014. All sub-categories of the index - Production Level (63.2pts), Inventories (61.1pts), New Orders (60.0pts), Supplier Delivery time (57.4pts) and Employment level (53.9pts) - recorded faster increases in the month. As a result, 15 of the 16 sub-sectors expanded in the period under review; petroleum & coal products sub-sector advanced the most, followed by textile, apparel, leather & footwear, cement, transportation equipment, paper products, food, beverage & tobacco products, furniture & related products, plastics & rubber products, non-metallic mineral products, printing & related support activities, appliances & components, chemical & pharmaceutical products, fabricated metal products, primary metal and electrical equipment in that order while the only contraction was in the computer & electronic products sector.
In the same vein, Non-manufacturing PMI expanded for the 8th consecutive month, settling at 62.1pts which is 4.5pts higher than 57.6pts recorded in November. Similar to Manufacturing PMI, all sub-categories of the index increased at a faster pace in December: Business activity (67.4pts), Inventory (62.9pts), New orders (62.2pts) and Employment level (55.7pts) increased 8.0pts, 4.9pts, 3.8pts and 1.1pts M-o-M respectively. Accordingly, 15 of the 18 sub-sectors improved within the period under review.
Developments in PMI readings for both manufacturing and non-manufacturing sectors continue to point to the fact that improved liquidity in the FX market remain a key determinant of the performance of the broader economy. However, despite the evident improvement in PMI readings during the year, we believe the gains still remain fragile as the impact is yet to be reflected in Non-Oil sector GDP growth which was unimpressive in Q3:2017. Nevertheless, PMI readings for the last 3 quarters of 2017 were largely positive and we expect this to be sustained into the New Year.