THUR, SEPT 03 2020-theG&BJournal- The August headline Purchasing Managers’ Index™ (PMI®) figure derived from the Stanbic IBTC Bank PLC survey shows PMI rose sharply in August to 54.6, up from 50.4 in July, reflecting recovery in the Nigerian private sector as demand improved following the easing of restrictions related to the coronavirus pandemic.
Stanbic IBTC reckons that the reading signalled a marked improvement in business conditions, following a return to growth in the previous month. Output and new orders rebounded, rising sharply from July. Employment was broadly stable, although excess capacity remained as a result of the severe declines in new business during the second quarter.
According to the Stanbic IBTC survey report, jump in new orders continued midway through the third quarter as client demand strengthened following the easing of COVID-19 restrictions.
A similar picture was evident with regards to business activity, which rose at a substantial pace that was much stronger than seen in the previous month.
Despite strong rises in workloads during August, data suggested that the steep contractions seen during the second quarter left residual spare capacity.
‘’Companies were therefore able to continue depleting backlogs of work while leaving staffing levels broadly unchanged. The stability of employment did bring a four-month sequence of job cuts to an end, however,’’ Stanbic said.
Spare capacity was also reported at suppliers. This, alongside relatively quiet road conditions, meant that vendors were able to speed up deliveries in spite of a marked increase in purchasing activity. Stocks of purchases meanwhile rose sharply for the second month running.
Overall input cost inflation quickened to a fresh series record in August, despite a reduction in staff costs. The rise in overall input prices was driven by a record increase in purchase costs, in turn largely the result of currency weakness. In response to higher raw material prices, companies raised their own charges. As was the case with input costs, the increase in selling prices was the quickest since the survey began.
Subdued business sentiment was registered again amid concerns around the lasting impact of COVID-19.
Stanbic noted that Currency weakness led to another record increase in purchase costs, in turn feeding through to a rise in selling prices unprecedented since the survey began in January 2014.
The Central Bank of Nigeria (CBN) had clocked the August PMI at 48.5 index points, indicating contraction in the manufacturing sector for the fourth consecutive months. It said only 6 subsectors reported expansion in the review month.