Saturday, July 13, 2024
24.6 C
Lagos

Stanbic IBTC Bank Nigeria PMI: Output Returns to Growth but Inflationary Pressures Remain

The Nigerian private sector returned to growth in December, with renewed increases in both output and new orders recorded amid some signs of recovery in demand. This was despite continued intense inflationary pressure, with purchase costs and selling prices each rising at sharper rates than in November. Meanwhile, business confidence dropped to the joint-lowest in the decade-long survey so far. The headline figure derived from the survey is the Stanbic IBTC Purchasing Managers’ Index (PMI).

Muyiwa Oni, Head of Equity Research West Africa at Stanbic IBTC Bank commented: “The headline PMI returned to expansion territory for the first time in three months in December 2023, posting 52.7 from 48.0 in November. The reading implies a strong improvement in the health of the private sector, and one that was the most marked since June. Demand conditions showed signs of recovery, leading to a marked increase in new orders following two months of contraction. The Nigerian economy grew by 2.54% y/y in Q3:23 relative to 2.51% y/y growth in Q2:23. The growth improvement relative to the prior quarter was primarily driven by a modest decline in the Oil GDP (-0.85% y/y vs Q2:23: -13.43% y/y), as the non-oil sector’s growth (2.75% y/y vs Q2:23: 3.58% y/y) moderated due to the impact of FX and PMS subsidy reforms witnessed in the review period. Growth is likely to settle at 2.96% y/y in Q4:23 supported by an expected return of the oil sector to growth, taking the full year growth print at 2.60% y/y. Nevertheless, feedback from respondents continue to show intense inflationary pressure, with purchase costs and selling prices each rising at sharper rates than in November. Consumer price pressures remain unrelenting in Nigeria, rising by 87bps from the previous month to 28.20% y/y in November – its highest point since August 2005 (28.21% y/y). Parsing through the breakdown, food inflation rose by 132bps to 32.84% y/y, while the non-food inflation settled at 22.55% y/y, with the most significant pressures coming from the utilities (23.37% y/y), health (23.85% y/y), and transport (27.02% y/y) sub-baskets. We expect inflationary pressures to remain elevated in the near term.”

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration. The headline PMI moved back above the 50.0 no-change mark for the first time in three months at the end of 2023, posting 52.7 in December from 48.0 in November.

The reading signaled a solid improvement in the health of the private sector, and one that was the most marked since June. Demand conditions showed signs of recovery, leading to a marked increase in new orders following two months of contraction. Similarly, business activity also returned to growth and was up solidly over the month. Sector data showed that wholesale & retail activity continued to fall, however.

The improvements seen in December were recorded in spite of a continuation of the severe price pressures seen in recent months. While overall input price inflation softened slightly, it remained among the sharpest on record. The slowdown in overall input price inflation reflected a softer, but still solid increase in staff costs. Meanwhile, the rate of purchase price inflation quickened for the third successive month and was the sharpest for two years.

Panelists again linked inflation to exchange rate weakness and higher fuel costs, while there were also reports of higher prices for animal feed. In turn, selling price inflation also quickened, and was the fastest since the survey record posted in August. The improvements in new orders and business activity in December encouraged companies to take on extra staff at the end of the year, thereby extending the current sequence of job creation to eight months.

Purchasing activity and inventory holdings were also expanded. Backlogs of work increased for the third time in the past four months, however, amid issues with the cost and availability of materials and customer payment delays. Competitive pressures and requests for faster deliveries led to a tenth consecutive monthly improvement in vendor performance.

Despite the return to growth of activity in December, confidence in the year-ahead outlook continued to wane, easing for the second month running to the joint-lowest since the survey began in January 2014.

spot_img

Hot this week

NGX Group’s Revolutionary e-Offering Platform Goes Live Following SEC Approval

Nigerian Exchange Group (NGX Group) has unveiled NGX Invest,...

Commonwealth Short Story Award Winner Releases The Talent Coach

Dr. Frederick Mordi, a Commonwealth Short Story Award winner,...

NAICOM, NFIU to Strengthen Partnership on Financial Regulation

From Left: Mr. Ahmed Adamu Director, Innovation & Regulation...

Sterling One Foundation, United Nations Nigeria Unveil Africa Social Impact Summit 2024

The official press conference for the Africa Social Impact...

Access Holdings: Facts Behind the Offer Session at NGX

L-R: Morounke Olufemi, Group Chief Financial Officer, Access Holdings...

Topics

Pension Funds Launch $1.2bn Lawsuit Against Banks

Investors including pension funds and asset managers in the...

NIGERIA: Between Mismanagement & Leaking Treasury

The Treasury of the Federal Republic of Nigeria is sick. According to economic doctors, the Nigerian treasury is suffering from acute mismanagement and basket-type leakages. Other diagnosed ailments include falling oil prices and dwindling foreign reserves. The sicknesses were made public recently by Ngozi Okonjo-Iweala, Federal Minister of Finance and Co-ordinating Minister of the Economy in Abuja.

NCC, NIRSAL, NCDMB, NNPC, NLNG to Lead Partners @GOCOP Conference

The sixth annual conference of the Guild of Corporate...

IWD2023: Unity Bank Unveils Women Network to Promote Advocacy for Gender Equity

  As part of initiatives to mark International Women’s Day,...

Global Confidence Survey of Airline CFOs, Heads of Cargo

When surveyed in early-July, airline CFOs and heads of...

Business Journal Named in Top 20 Nigeria Business Blogs Ranking

The Business Journal online (www.businessjournalng.com) platform has been named...

Pension Assets Hit N7.7tr in Feb 2018

Hajia Aisha Dahir-Umar Acting DG PenCom The National Pension Commission (PenCom) says...

MTN Nigeria Refutes Bribery Allegation Over NCC Fine

MTN Nigeria has denied a bribery allegation over its...
spot_img

Related Articles

Popular Categories

spot_imgspot_img