September 9, 2024/CSL Research
The Central Bank of Nigeria (CBN) recently released the Purchasing Managers’ Index (PMI) survey for August 2024, covering three key sectors: Industry, Services, and Agriculture. The composite PMI for August stood at 50.2 points, marking the first expansion in economic activities after 13 consecutive months of contraction. Typically, a PMI above 50.0 indicates an expansion in business activity, while a reading below 50.0 signals a contraction. A score of 50.0 suggests no change. Although the August PMI moved into the expansion zone, the gradual improvement is evident in the previous months’ readings: 46.0 in May, 48.8 in June, and 49.7 in July. This upward trend highlights a steady recovery in economic activities.
In August, several key PMI indicators showed positive trends. Output level (50.8 points), new orders (50.5 points), and stock of raw materials (51.3 points) all expanded. Suppliers’ delivery time remained at 50.0 points, indicating no change during the review period. However, the employment index, at 48.7 points, reflected a slight contraction in employment levels for the eighth consecutive month. This figure remained unchanged from July 2024, signalling no significant change in hiring during the period. The improvement in output levels suggests growth in production for the second consecutive month, likely driven by the positive trends in stockpiling and increased incoming business and orders.
The sectoral breakdown of the August PMI reveals that the Services sector (50.7 points) expanded for the third consecutive month, while the Agricultural sector rose to 50.5 points, signalling a recovery after three months of contraction, following an earlier expansion in April. In contrast, the industry sector remained in contraction at 49.2 points, marking its seventh consecutive month of decline, with only one expansion in January over the past year. The increase in output levels across most sectors, except Industry, indicates the possibility of an economic recovery, with production likely to stabilize further as inflationary pressures ease. However, the recent spike in PMS (petrol) prices could dampen consumer demand, particularly in the industry sector, where new orders remain weak.
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