Shrinking PMI Shows Manufacturing Sector In Steep Decline
OMOTAYO ARAOYE
Nigeria’s Manufacturing sector shrinks for the third consecutive month by 44.9 index points raising fears about more job loss on the impact of the Covid-19 that has dislocated the economy and caused uncertainty.
The latest Purchasing Managers’ Index (PMI) Survey Report by the Central bank of Nigeria (CBN) for the month of July, released on Wednesday indicates contraction in the manufacturing sector for the third time, a decline compared to 41.1 and 42.4 index points recorded in June and May 2020 respectively.
With the PMI below 50 percent for the month, Nigeria definitely faces the threat of more contraction in the third quarter that is currently ongoing.
Of the 14 surveyed subsectors, five sub-sectors grows above 50 percent threshold in the month reviewed, while the transportation equipment subsector and nonmetallic mineral products sector reported no change.
However, the remaining 12 subsectors reported contraction and they are printing & related support activities; primary metals; fabricated metal products; paper products; food, beverage & tobacco products; chemical & pharmaceutical products; furniture & related products; electrical equipment; plastics & rubber products; petroleum & coal products; textile, apparel, leather & footwear and cement.
While the manufacturing index recorded a decline, production level, new orders, employment level, and raw material inventories all recorded further decline compared to their June 2020 figures.
The composite PMI for the non-manufacturing sector stood at 43.3 points in July 2020 indicating contraction for the fourth consecutive month but showing a gradual recovery in non-manufacturing activities when compared to 35.7 recorded in June 2020.
Among the 17 surveyed subsectors, 2 subsectors: arts, entertainment & recreation, and transportation & warehousing reported growth (above 50 percent threshold) in the review month.
The remaining 15 subsectors reported declines in the following order: water supply, sewage & waste; repair, maintenance/washing of motor vehicle; professional, scientific, & technical services; finance & insurance; educational services; public administration; wholesale/retail trade; accommodation & food services; real estate rental & leasing; utilities; agriculture; management of companies; Information & communication; construction; health care & social assistance and electricity, gas, steam & air conditioning supply.
The current PMI is a bad signal for the economy as key sectors continue to shrink, unemployment may hit 40% by the end of 2020 as forecasted earlier.
July 2020 PMI survey was conducted by the Statistics Department of the Central Bank of Nigeria during the period July 13-17, 2020. The respondents were purchasing and supply executives of manufacturing and non-manufacturing organizations in all 36 states in Nigeria and the Federal Capital Territory (FCT).
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