LAGOS, Nigeria ( VOICE OF NAIJA)-Stanbic IBTC’s Purchasing Managers Index (PMI) has reached a seven-month low due to subdued demand and escalating price pressures.
The monthly PMI report, published on Monday, revealed that the headline figure dropped from 52.1 points in May to 50.1 points in June, marking its lowest level in seven months.
Commenting on the report, the Head of Equity Research West Africa at Stanbic IBTC Bank, Muyiwa Oni, said, “The Stanbic IBTC headline PMI dropped to a seven-month low of 50.1 points in June from 52.1 in May due to moderation in domestic demand amid the intensification of price pressures, leading to slowdowns in growth of output and new orders. Notably, new orders recorded a near-stagnation as new business increased only marginally and at the slowest pace in the current seven-month sequence of expansion.
“Besides, financial challenges at customers reportedly limited the ability of firms to fully benefit from any improvement in underlying demand.
“In line with the picture for new orders, output rose at a slower pace during June, settling at its weakest level in four months. Meanwhile, the rate of inflation in overall input prices remained elevated in June, ticking higher for the second month running to the strongest since March.”
Oni noted that nearly 60 percent of the survey respondents reported an increase in input costs for the month.
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“In line with the trend in input costs, companies increased their selling prices sharply again in June. The pace of inflation quickened slightly from that seen in May,” he stated.
He mentioned that by the end of the second quarter, private sector performance had been subdued, influenced by heightened price pressures, elevated interest rates, and persistent currency weakness in the domestic economy.
“The PMI reading in the quarter is consistent with a likely slowdown in the non-oil sector’s growth to 2.6 per cent y/y in Q2:24 from 2.8 per cent y/y in Q1:24. Nonetheless, headline inflation is likely to peak in June, with moderation expected in H2:24 as the year-on-year effects of PMS subsidy removal (which induced higher fuel prices) and significant currency depreciation (which accompanied the FX unification) fade.
“This, in addition to the commencement of the primary harvest season in September, is likely to provide some respite for consumers in H2:24,” he noted.
Additionally, the report noted that although new orders saw an increase in June, the pace of growth was minimal, marking the slowest expansion in the past seven months.
Moreover, companies raised their selling prices sharply in June, reflecting a parallel rise in input costs as highlighted in the report.
“Purchase price inflation was recorded amid currency weakness and higher raw material costs, particularly those related to animal feed. Meanwhile, efforts to help workers with increased living and transportation costs led to a further solid rise in wages,” it indicated.
The Stanbic IBTC Bank Nigeria PMI is compiled by S&P Global through surveys distributed to purchasing managers within a panel comprising approximately 400 private sector companies.