By Dipo Olowookere
A unit of FBN Holdings Plc, FBNQuest, has released its latest headline reading of manufacturing Purchasing Managers’ Index (PMI) for Nigeria as 60.0 in December 2016 from 48.8 in November, a 23 percent increase.
The PMI, which takes the temperature of the sector, has developed into a core forward indicator in the economy.
FBNQuest said the only explanation for the surge in the headline reading was the seasonal boost to household demand.
“Since Nigeria is mired in recession, the extent of the seasonal demand boost this year has come as a surprise.
“Once we strip out seasonal effects, the landscape for manufacturing is little changed. Substitution is beginning to have an impact, while the CBN and stated-owned investment vehicles are providing additional credit for the sector.
“The FGN’s expansionary fiscal stance is also supportive in the form of accelerated capital releases.
“We suspect, however, that manufacturing will be one of the last sectors to benefit because of the scarcity of forex, which we expect to continue in the year. In conclusion, it may well be that the reading in January erodes the gains of this report,” FBNQuest said in the report.
In Q3 2016, GDP contracted at constant basic prices by -2.2 percent y/y, the worst out turn since 2011 in the new national accounts. The figure was dragged down by a sabotage-driven -22.0 percent y/y contraction in the oil economy.
The non-oil economy was flat y/y, while manufacturing shrank by -4.4% y/y in Q3, compared with -3.4% the previous quarter.
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