PMI in Q1 2021: A Hint at Recovery?

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Recently, the CBN in its Monetary Policy Committee (MPC) meeting communique, revealed Nigeria’s Purchasing Managers Index (PMI) for the months of January and February 2021.

According to the numbers, economic activities remained below the expansion threshold of 50pts during the survey period.

This was true for the Manufacturing and Non-manufacturing, indices. However, a month-on-month analysis indicated that both manufacturing and non-manufacturing economic activities improved significantly, from 44.9pts and 43.3pts in Jan-2021 to 48.7pts apiece in Feb-2021.

The MPC communique also revealed that the Employment level component of the Manufacturing and Non-manufacturing PMIs increased to 45.6 and 48.0 index points, respectively, from 44.2 and 45.0 index points in the prior month.

Clearly, the weakness across the purchasing manager’s indices indicates that economic activities within the country are yet to recover to their pre-COVID-19 levels.

Certainly, economic recovery is underway, considering the rebound in economic activities observed in Q4-2020 and the scale of reopening of the economy since the great lockdown of 2020.

However, the sub-50pts PMI reading between Jan-2021 and Feb-2021, foreshadows a muted growth outlook for Q1-2021, if history is anything to go by.

For context, the manufacturing sector is heavily reliant on FX availability (but the FX market remain largely illiquid) and increased consumer welfare, which appears to still be in a puddle.

Overall, our forecast for GDP growth in Q1-2021 is a mild y/y expansion at best, as seen in Q4-2020, considering the base-effect of Q1-2020 (+1.9% y/y), given that the Covid-19 pandemic had not surfaced as of then.

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