Declining demand, FX illiquidity halt recovery in activity levels
Faltering consumers demand explained the recent purchasing managers index (PMI) readings which stood below 50 index points, CSL Stockbroker, a wholly owned subsidiary of FCMB group has noted.
According to data released by the Central Bank of Nigeria (CBN) for the month of September, activity levels in the manufacturing and non-manufacturing sectors weakened even as readings remained below 50 index points.
Specifically, the manufacturing PMI moderated to 46.9 in September from 48.5 in August, ending the second consecutive month of recovery in the sector since touching 41.1 in June.
Similarly, the non-manufacturing PMI slowed to 41.9 in September from 44.7 in August, halting the third consecutive month of recovery in the index since it fell to an all-time low of 25.3 in May.
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CSL explained that save for supplier delivery time (+0.5) which improved marginally, the remaining four indices used in gauging the manufacturing sector deteriorated in September.
Specifically, raw materials/work-in-progress (WIP) inventory (-3.1), new orders (-2.8), production level (-1.9) and employment level (-0.5) receded.
“In our view, FX illiquidity which has impacted ability to import raw materials and the weakness in consumer demand evidenced in the decline in raw materials/WIP and new orders respectively were the major contributors to the pervasive slowdown in the manufacturing sector”, CSL stated.
The data further revealed that, of the 14 surveyed subsectors in the manufacturing sector, four (compared to six in August) reported growth while 10 (compared to eight in August) contracted.
Like the manufacturing PMI, the non-manufacturing PMI also showed weakness across three of the four key metrics used in gauging activity level; Business Activity (47.4 to 43.7), Level of new orders (44.0 to 39.5), Employment level (44.3 to 41.6) while Inventory level remained flat at 43.1.
As observed with the manufacturing sector, the weakness across the majority of the indices is a fallout of the reduction in the level of new orders from customers offsetting the gains from relaxation of the social distancing measures which has been a key driver of activities for service-based organisations.
Declining demand, FX illiquidity halt recovery in activity levels
