Nigeria: PMI surges to two-year high in July
August 4, 2017
The Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) rose from 52.9 in June to 54.8 in July, marking a two-year high. As a result, the indicator lies comfortably above the 50-point threshold that separates expansion from contraction in business conditions for the seventh month running.
July’s result was driven by the strongest growth in new orders and output in 25 and 24 months respectively, with backlogs of work increasing at a brisk rate as some firms highlighted insufficient capacity to cope with the greater demand. The domestic market drove the robust performance, with new export orders actually declining in July. Job creation was the strongest in a year, although it still remained relatively mild, and both input and output price inflation rose slightly in July compared to the prior month, despite remaining low by historical standards.
IHS Markit analyst Ayomide Mejabi offered a nuanced assessment of the economic situation: “Given improvements to Nigeria’s trade balance in recent months as a result of improvement in oil prices as well as production volumes, the economy is expected to move back into moderate growth of around 1.0% year-on-year in 2017. That said, effective monetary policy tightness is expected to hinder a more robust economic recovery in the short term as arguably, authorities continue to prioritise FX rate and price stability over faster economic growth.”
Author: Oliver Reynolds, Economist