Survey: Private Sector Productivity Improved in October

Dike Onwuamaeze

The Purchasing Managers Index (PMI) survey of the Stanbic IBTC Bank has revealed a solid improvement in business conditions in Nigeria’s private sector in October.

The data collated from the PMI survey showed that the volume of production, new orders for goods and services, and buying activities of the private sector rose sharply during the month under review.

It also showed that employment, inventories and export of goods and services continued to rise though at slower rates as companies reduced their backlogs for the seventeenth month in a row. And as in the previous month, the manufacturing sector topped the led in October.

According to Stanbic IBTC said: “The headline PMI improved from 52.3 in September, to 54.1 in October, indicating a sixteenth successive monthly expansion. (The headline PMI readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration).

“Output levels in Nigeria’s private sector rose at a sharp and accelerated pace in October, thereby extending the sequence of growth to 11 successive months. The latest rise was sharp overall and the quickest since July. According to panel members, the expansion stemmed from robust sales growth and strengthening demand conditions.

“Amid reports of improved market conditions and rising client requirements, new orders continued to expand. The rate of growth was robust, quickened from that seen in September and outpaced the long-run series average.

“Consequently, firms raised their output levels at a marked and accelerated pace. Sector data indicated that all four sub- sectors saw faster increases in output. Manufacturers registered the steepest expansion, followed by wholesale & retail, services and agriculture, respectively.”

Quantity of Purchase Index

The PMI revealed that new orders from the private sector also increased sharply.

According to the PMI, “Nigerian private sector firms purchased additional inputs during the month. Input buying rose for the sixteenth straight month in October and at the quickest pace since July. There were also reports of efforts to add to stocks. All four sub-sectors recorded expansions in buying activity, with manufacturers seeing a robust expansion.”

Export

The PMI survey said that following the first decline in five months that was witnessed in September, “private sector firms in Nigeria recorded a renewed uptick in new export orders in October. The rate of growth was modest with panelists attributing higher sales to improved demand conditions in neighbouring countries.”

Employment Index

The survey revealed that employment in the labour market improved in October as private sector companies in Nigeria recorded a ninth consecutive monthly uptick in their staffing levels during the month under review.

“The rate of expansion softened from that seen in the previous survey period but was in line with the long-run series average. Firms that raised headcounts mentioned larger projects, and efforts to keep backlogs at bay.

“Sector data indicated modest rises in the services, wholesale & retail and agriculture sectors contrasted with a slight fall at manufacturing firms,” the PMI said.

Inflation

However, the PMI showed that the overall input price inflation quickened in October and rose to a five-month high amid a record increase in purchase costs. The spike in inflation was partly attributed to the depreciation of the Naira in the FX market.

“The rate of inflation was the second-steepest in the series history, surpassed only by that seen in May.The rate of purchase price inflation accelerated from September’s previous peak to a new series high at the start of the fourth quarter. Around 66 per cent of respondents registered higher purchase prices in October compared to September, whilst just two per cent noted lower costs. Survey members reported higher prices for fuel, shipping, and raw materials.

Unfavourable dollar-naira exchange rate movements were also mentioned,” the PMI said.

Output Prices Index

It added that, “around half of surveyed respondents opted to transfer additional costs on to their clients during the month, resulting in a substantial increase in selling prices. The rate of inflation was little changed from that seen in September and was the third-steepest increase in almost eight years of data collection. All four sub-sectors raised their charges in October, and at robust rates.”