Business Activities Pick Up After Covid-19 Lockdown
OMOTAYO ARAOYE
Business activities in the private sector are beginning to pick up across the country after four months of lockdown due to the COVID-19 pandemic.
The Purchasing Managers Index (PMI) of Stanbic IBTC Bank reported an increase in business activities from 46.4 in June 2020 to 50.4 in July.
The bank’s survey covers agriculture, mining, manufacturing, construction, wholesale, and retail and services.
Stanbic IBTC Economist, Gbolahan Taiwo, said business activities in the Nigerian private sector returned to expansion territory for the first time since March as output and new orders improved.
Taiwo said, “The PMI rose to 50.4 in July from 46.4 in June. Recall that the Nigerian government started to ease the COVID-19 containment measures in early May and that has brought about some resumption to economic activities albeit slowly.
“Although we expect business activities in the Nigerian private sector to continue to improve over the coming months, the overall economy will likely still fall into a recession as some parts of the economy, particularly the services sector will still struggle to recover perhaps until a vaccine is found.
“Also, despite the expected quarter-on-quarter growth, the higher base from last year will ensure a year-on-year contraction.”
The economist further remarked that the employment index remains below the expansion mark of 50 for the fourth consecutive month as companies continue to reduce staffing owing to COVID-19 disruption of economic activities.
This, according to him, will continue to impact negatively on the demand side of growth as aggregate demand and purchasing power of the consumer will remain under pressure.
“Output and new orders in the Nigerian private sector improved by 52 and 52.5 respectively for the first time since March as a result of higher new orders and an easing of the lockdown,” he stated.
The Stanbic IBTC Bank’s survey gathered responses from about 400 private sector companies which were stratified by detailed sector and company workforce size, based on their contributions to GDP.
The recent surge in prices extended into the second half of the year, with overall input prices rising at the sharpest pace in the survey’s history.
Respondents linked higher purchase costs to currency weakness and shortages of raw materials.
The PMI is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses.
The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. The indices are then seasonally adjusted.
The PMI is a weighted average of the following five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%).
For the PMI calculation, the Suppliers’ Delivery Times Index is inverted so that it moves in a comparable direction to the other indices.
Underlying survey data are not revised after publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.
The Purchasing Managers’ Index surveys are also available for over 40 countries and also for key regions including the eurozone.
They are the most closely-watched business surveys in the world, favoured by central banks, financial markets and business decision-makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends.
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