Report: Manufacturing, Agriculture Record fastest Increase in Production Cost in January

<strong>Report: Manufacturing, Agriculture Record fastest Increase in Production Cost in January</strong>

Dike Onwuamaeze

The Purchase Manager Index (PMI) report of the Stanbic IBTC Plc showed that operational conditions in the Nigerian economy has resulted in the fastest input cost for operators in the manufacturing and agricultural sector in January 2023.

The PMI report attributed the increase in input cost to the rising fuel and raw material costs that were exacerbated by the weakness of the Naira in the foreign exchange market.

Moreover, firms that were covered by the PMI survey also “reported having been hindered by issues with machinery and power supply.”

It said: “With input costs continuing to rise sharply, firms again increased their selling prices accordingly. As a result, January saw a further rapid pace of charge inflation that was well above the series average. The agriculture and manufacturing sectors posted the fastest increases in output prices.”

The report noted that although the “rate of overall input cost inflation continued to moderate in January, easing for the second month running to the softest for a year,” nevertheless the “input prices continued to rise sharply and to a greater extent than at any point prior to May 2021. Sector data showed that cost pressures were most pronounced at manufacturers.”   

The PMI report further stated, “January data pointed to a further marked increase in purchase prices in the Nigerian private sector, despite the rate of inflation easing to a three-month low. Higher costs for fuel and raw materials were widely reported, with a number of respondents indicating that currency weakness had exacerbated inflationary pressures.”

The report also showed that the headline PMI declined to 53.5 in January 2023 from 54.6 in December 2022 even though employment increased during the month under review at its fastest rate since June 2018.

It said: “The Nigerian private sector registered a slight loss of growth momentum in January. Output and new business continued to rise markedly, but at softer rates than at the end of 2022. On a more positive note, firms raised employment at the fastest pace since June 2018 as part of efforts to complete work on time. On the price front, rates of inflation of input costs and output prices softened in January, but remained elevated.”

The headline figure derived from the January 2023 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 showed deterioration.

“The headline PMI dipped to 53.5 in January from 54.6 in December. Although still signaling a solid monthly strengthening of the private sector and the thirty-first in consecutive months, the rate of improvement was the softest since August 2022.”

However, business activities, according to the PMI report, increased at a much slower pace at the start of the year, despite the rate of growth remaining marked.

“The latest rise was the weakest in five months. Demand continued to improve, but some firms reported a moderation in customer numbers. Activity increased across each of the four broad sectors covered by the survey.

“The rate of expansion in new business also softened in January, but remained sharp nonetheless, again reflecting higher demand from customers. A desire to try and complete projects on time led companies to ramp up their hiring activities at the start of the year. Employment increased at a solid pace that was the fastest since June 2018.

“Despite expanded staffing levels, backlogs of work increased for the first time in three months. Firms reported having been hindered by issues with machinery and power supply,” the report said.

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