Private Sector Records Fragile Growth In May – StanbicIBTC Report
Despite the harsh economic terrain evidenced by the surging inflation, Nigeria’s private sector managed to record a fragile growth In May 2022.
In May the sector recorded 53.9 levels of business activities, dropping from the 55.8 recorded in April according to the Purchasing Managers’ Index (PMI) report by the Stanbic IBTC Bank Plc.
The PMI measures activities with readings and figures above 50.0 signal an improvement in business conditions in the previous month, while readings below 50.0 show a deterioration.
Although the readings for May are above the 50.0 thresholds, the month’s record of 53.9 is, however, a dip from April’s 55.8, showing the private sector recorded marginal growth in the month under review.
The May headline PMI signalled a 23rd successive monthly improvement in business conditions in Nigeria’s private sector, in which new orders rose sharply in May, albeit at a softer pace than in April.
Nigeria’s economic terrain keeps getting tougher as exemplified by data from the National consumer price index, (CPI) which shows that the inflation rate quickened to 16.82 per cent In April 2022- the highest in the last eight months.
“In April 2022, the consumer price index, (CPI) which measures inflation increased to 16.82 per cent on a year-on-year basis. This is 1.3 per cent points lower compared to the rate recorded in April 2021 (18.12) per cent.
This means that the headline inflation rate slowed down in April when compared to the same month in the previous year but increased from 15.92 per cent in March 2022. Increases were recorded in all COICOP divisions that yielded the Headline index,” the NBS stated.
“Business conditions in Nigeria’s private sector strengthened in May, but the rate of improvement slowed from April. Softer uplifts were recorded in output, new orders, purchasing activity and input inventories,” noted the Stanbic IBTC Bank Plc PMI report.
In the month, new orders were made, rising sharply and prompting a quicker expansion in headcounts. In turn, sentiment improved with companies also hoping that fruitful marketing campaigns would support output growth over the next 12 months.
“Sharp price pressures were once again evident, however, with overall input price inflation among the quickest in the survey’s more than eight-year history. Firms passed on higher expenses and sought to increase profit margins with output price inflation quickening in May.”
Firms, in May, raised their output levels, extending the current run of output growth to 18 months.
All four of the monitored sub-sectors recorded marked expansions, led by the manufacturing sector, Services, wholesale & retail and agriculture followed behind, respectively.
Firms continued to raise purchasing activity, with expansions now seen in each of the last 23 months. The overall rate of growth was sharp but eased to an eight-month low amid elevated costs. Nevertheless, companies were committed to raising their inventories as part of efforts to protect against future price hikes.
It further stated that “despite the latest moderation in output growth, firms were optimistic that their output levels would expand over the next 12 months. The degree of optimism improved from April.
Firms reported that business expansions would support output growth and as a result added to their headcounts. Staffing levels also rose in each of the last 16 months with the latest uptick the third-quickest in this sequence.
The lender in the report noted that larger workforces and higher prices for fuel, raw materials, transportation and other inputs led to another substantial increase in overall input prices in May.
Moreover, firms raised staff wages at the third-strongest rate in the series’ history. Higher expenses were passed on to clients with selling price inflation quickening in May.
Lead times shortened to the greatest extent for five months. As a result, firms received inputs promptly and were able to reduce their backlogs, as has been the case each month over the last two years.
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