June data signalled a broad stagnation of the Nigerian private sector as subdued demand and intense price pressures led to slowdowns in growth of output and new orders. In turn, employment rose only fractionally. There were signs of inflationary pressures picking up, with purchase prices, staff costs and selling charges all increasing more quickly than in May.
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 registered only fractionally above the 50.0 no-change mark in June to signal broadly unchanged business conditions at the end of the second quarter. At 50.1, the index was down from 52.1 in May and the lowest in seven months.
Although new orders continued to rise in June, the rate of expansion was only marginal and the weakest in the current seven-month period of growth. There were some reports of underlying demand improving, but sharp price rises meant that customers faced challenges being able to commit to new projects.
Companies increased their selling prices rapidly again in June, with the pace of inflation quickening slightly from that seen in May.
The sharper rise in output prices was in tandem with a faster increase in input costs. Purchase price inflation was recorded amid currency weakness and higher raw material costs, particularly those related to animal feed. Meanwhile, efforts to help workers with increased living and transportation costs led to a further solid rise in wages.
In line with the picture for new orders, output rose at a slower pace during June. The rate of expansion was slight and the weakest in four months. The agriculture and manufacturing sectors posted faster increases in business activity than services and wholesale & retail.
Muted demand conditions enabled companies to reduce their backlogs of work for the first time in four months. Some firms indicated that they had cleared all outstanding business. There were other reports, however, that difficulties securing materials (often linked to prices) caused delays in the completion of projects, meaning that the overall reduction in backlogs was only marginal. With new order growth slowing and backlogs of work down, the vast majority of companies kept their staffing levels unchanged in June. Employment rose fractionally for the second month running.
Firms increased their purchasing activity at a solid pace, reflecting recent rises in new orders and efforts to get ahead of expected future price rises. Inventories also increased.
Business confidence remained among the lowest on record in June. Where firms were optimistic in the outlook for output, this was linked to plans for business expansions, the securing of new funding and efforts to export.
