Manufacturing index rises to 56.2 points – Sunnews
The Central Bank of Nigeria (CBN) says manufacturing sector sustained its expansionary trend for the 18th consecutive month as its Purchasing Managers Index (PMI) in September stood at 56.2 index points, just as the non-manufacturing sector PMI stood at 56.5 points.
The PMI, released Tuesday, which indicated expansion both in the manufacturing and non-manufacturing sectors, adds:
“The manufacturing index PMI, however, grew at a slower rate when compared to the index in the previous month. Of the 14 sub-sectors surveyed, 10 reported growth in the review month.
“The composite PMI for the non-manufacturing sector stood at 56.5 points in September 2018, indicating expansion in the non-manufacturing PMI for the 17th consecutive month.
“The index grew at a slower rate when compared to that in August 2018.”
Commenting on the report, analysts with Cordros Capital, in an e-mail to investors, warned that the PMI is not a consistent guide to economic performance.
It states: “Earlier today, the CBN released its monthly Purchasing Managers Index report, which showed sustained expansionary trend for the 18th consecutive month in September.
“The report shows manufacturing and non-manufacturing indices at 56.2 and 56.5 point respectively, suggesting sustained healthy business conditions.
Though still well ahead of the 50 expansion mark, both indices expanded at a slow pace for the period when compared to last month’s reading of 57.1 and 58 respectively.
Nonetheless, the third quarter (Q3-2018) PMI averages of 56.7 and 57.4 (Q2-2018: 56.8 and 57.4 index point), largely underscore our positive growth expectation for both manufacturing and service GDP over the third quarter.
To our mind, even as headline inflation resumed uptick in August (+9 basis points to 11.23 per cent year-on-year{ y/y}), we believe foreign exchange (FX) stability and liquidity continue to support activities across manufacturing and non-manufacturing space.
“Again, we reiterate that PMI is not always a seamless and consistent guide to economic performance. However, a sustained expansionary reading provides some support to our positive Q3-2018 GDP expectation.
For evidence, Manufacturing, Service, and Agriculture contribute 9.3 per cent, 37.5 per cent and 22.9 per cent to GDP respectively, and strong readings over Q3-2018 suggest continued non-oil led GDP growth.”
“In addition, the currency outlook remains strong, with rising oil prices (September: +9.1 per cent month-on-month {m/m} to $84.92) and improving domestic production (+4.5 per cent m/m to 1.73 mbpd) suggesting the CBN will continue to support the market to keep rates at around current levels.”
Meanwhile, the apex bank has predicted that the nation’s banks would tighten lending criteria in this last quarter of the year.
According to CBN in its Credit Conditions survey for the last quarter released at the weekend, this was due to the increased lending activities in the third quarter (Q3’18) driven by pursuit of market share objectives and improved economic conditions.
Among other things the report revealed that banks will tighten credit scoring criteria for secured household loans, demand stronger loan covenants and increase collateral requirements for corporate loans in the Q4’18.
The report states: “Lenders expect to tighten the credit scoring criteria in the next quarter, yet still expect an increase in the proportion of approved households’ loan applications in Q4 2018.
Lenders required stronger loan covenants from all firm sized businesses in the current and next quarters. Fees/commissions on approved new loan applications fell for all firm sized businesses
“More collateral requirements were demanded from all firm sizes on approved new loan application in Q3’2018. Similarly, lenders will demand for more collateral from all firm sizes in the next quarter.”
On banks’ expectation in terms of demand and supply of credit in Q4’18, the report adds: “The availability of secured credit to households increased in Q3’2018 and was expected to increase in the next quarter.”
Source: Sunnewsonline
