Nigeria: PMI falls in June amid stronger inflationary pressures
The Purchasing Managers’ Index (PMI)—produced by Stanbic IBTC Bank and S&P Global—came in at 53.2 in July, down from May’s 54.0. As a result, the index remained above the 50.0 no-change threshold, pointing to a continued, yet slower, improvement in private-sector operating conditions from the previous month.
June’s downtick was chiefly caused by significantly stronger inflation, after the government removed fuel subsidies in late May: Both input cost and output charge inflation accelerated markedly. In turn, growth in output and new orders slowed. Meanwhile, higher inflation expectations regarding input costs caused firms to increase their purchasing activity. On the employment front, firms continued to expand their headcounts at a mild rate. Lastly, business sentiment fell to the second-lowest on record. However, firms remained optimistic regarding future output levels thanks to investment and business expansion plans.
Muyiwa Oni, head of equity research West Africa at Stanbic IBTC Bank, commented:
“Indeed, petrol pump prices have increased by an average 176% countrywide. This may drive transport inflation further up (it contributes 7.5% to the inflation basket) as major transportation vehicles ‘intra-state’ use petrol. This may also spill over to inflation sub-baskets.”