…Key findings, weaker rises in output and new orders
…Overall input costs increase at joint-fastest pace on record
…Lowest business sentiment in survey’s history
Steep price pressures acted to limit the pace of growth in the Nigerian private sector in July.
Overall input costs rose at a pace unsurpassed in more than nine-and-a-half years of data collection, with selling prices up rapidly in response. Rising price pressures impacted demand, with growth of both new orders and business activity softening as the second half of the year got underway. Meanwhile, business confidence hit a new low.
There was more positive news on the employment front, however, as the rate of job creation quickened to the fastest since January.
The headline figure derived from the survey is the Purchasing Managers’ Index (PMI).
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 posted above the 50.0 no-change mark for the fourth month running in July and thereby signalled a further improvement in business conditions in the Nigerian private sector during the month.
That said, at 51.7 the index was down from 53.2 in June and pointed to a modest strengthening of operating conditions that was the least pronounced in the current expansionary sequence.
The softer improvement in the health of the private sector reflected trends in output and new orders during July. In both cases, rates of growth eased to the weakest since the respective returns to expansion following the cash crisis at the start of the year.
While some firms reported having been able to secure new contracts amid rising customer numbers, others highlighted the negative impact on demand of rising prices.
July data signalled a steep increase in overall input prices, with the rate of inflation the joint-fastest since the series began in January 2014, equal with that posted in November 2021.
Sources: Stanbic IBTC Bank, S&P Global PMI. Data were collected 12-27 July 2023.
Purchase costs were a key driver of overall input price inflation. Higher fuel costs following the subsidy removal and currency weakness were the main factors leading purchase prices to rise. Meanwhile, staff cost inflation hit a six-month high as firms increased pay to help staff deal with rising transport costs.
With input costs up rapidly, companies increased their output prices accordingly, and at one of the strongest rates on record. More than half of companies increased their charges over the month.
More positively, employment increased for the third month running in July, and at a solid pace that was the fastest since
Survey methodology
The Stanbic IBTC Bank Nigeria PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 private sector companies. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services. Data were first collected January 2014.
Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month. A diffusion index is calculated for each survey variable. The index 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 headline figure is the Purchasing Managers’ Index (PMI). 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.
