Sustained manufacturing PMI aids sector’s contribution to GDP
Rising consumer demand in the second half of the year, preparatory to the yuletide celebrations, as well as availability and stability of foreign exchange for production, impacted positively on the manufacturing Purchasing Managers’ Index (PMI) as well as the sector’s contribution to Gross Domestic Growth (GDP) in the third quarter.
According to the National Bureau of Statistics (NBS), industrial growth rose from 0.7% y/y in Q2’18 to 1.9% y/y in Q3’18, aided by moderating costs pressures and continued foreign exchange stability during the quarter.
Indeed, the main contributors to growth were the Food & Beverages (45% of manufacturing; 2.9% y/y growth) and Cement (9% of manufacturing; 8.1% y/y growth) sectors.
Experts at Vetiva Research expressed optimism of continued manufacturing growth in Q4’18 (2.4% y/y) but noted that stable forex supply and minimal currency depreciation are vital for continued industrial growth in 2019.
“In addition, we note that expected higher inflation would pressure raw material costs. More positively, we are hopeful for higher consumer spending power in 2019 in the event of the minimum wage hike implementation. Overall, we forecast 2019 GDP growth of 3.7% y/y for Nigeria’s manufacturing sector”, they added.
The NBS trade data showed that trade in manufactured goods stood at N2.68 trillion in Q3, 2018. The export component was valued at N65.8 billion while imported manufactured goods stood at N2.62 trillion. During the quarter, imported manufactured goods increased by 122.97% over the level recorded in Q2, 2018.
Total value of trade in raw material in Q3, 2018 stood at N323.8billion or 3.6%. During the quarter the export component of raw material was valued at N32.2billion or 0.66% while import of raw material accounted for N291.6 billion or 6.99% of the total import trade.
Raw materials exported during the quarter include Urea exported to Brazil and Benin Republic in values worth N10.4 billion and N0.5 billion. Leather further prepared after tanning were exported mainly to Spain and Italy in values N4.3billion and N3.9 billion.
A review of the PMI showed that the faster expansion rate in the manufacturing sector in November was driven by stronger customer demand despite the increase in selling prices, to 51.9 (from 51.2).
According to the survey, the manufacturing composite PMI stood at 57.9 index point in November 2018 (higher than 56.8 index point in the preceding month), the twentieth consecutive expansion, as new orders and production volume expanded to 58.1 and 59.9 in November (from 56.8 and 58.9 in October) respectively – despite the rise in output prices.
Also, stock of raw materials increased to 58.7 in November (from 56.2 in October) amid increased sales and shortened supplier delivery time due to greater efficiency of suppliers, to 56.9 (from 56.4).
In spite of the rise in average inputs cost, to 52.6 in November (from 50.7 in October), inventory grew faster, at 59.6 (from 57.6). Given the faster growth in business activity, number of persons employed increased as employment level index points expanded slower, to 56.2 (from 55.7).