Business conditions in Nigeria's private sector strengthened in May, but the rate of improvement slowed from April. Softer uplifts were recorded in output, new orders, purchasing activity and input inventories. That said, new orders continued to rise sharply which prompted a quicker expansion in headcounts. In turn, sentiment improved with companies also hoping that fruitful marketing campaigns would support output growth over the next 12 months.
Sharp price pressures were once again evident, however, with
overall input price inflation among the quickest in the survey’s more than
eight-year history. Firms passed on higher expenses and sought to increase
profit margins with output price inflation quickening 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. At 53.9 in May,
down from 55.8 in April, the headline PMI signalled a twenty-third successive
monthly improvement in business conditions in Nigeria's private sector. New
orders rose sharply in May, albeit at a softer pace than in April.
Firms raised their output levels, extending the current run
of output growth to 18 months. All four of the monitored sub-sectors recorded
marked expansions, led by the manufacturing sector. Services, wholesale &
retail and agriculture followed behind, respectively. Firms continued to raise
purchasing activity, with expansions now seen in each of the last 23 months.
The overall rate of growth was sharp but eased to an eight-month low amid
elevated costs. Nevertheless, companies were committed to raising their
inventories as part of efforts to protect against future price hikes.
Despite the latest moderation in output growth, firms were
optimistic that their output levels would expand over the next 12 months. In
fact, the degree of optimism improved from April. Firms reported that business
expansions would support growth in output and as a result added to their
headcounts. Staffing levels have risen in each of the last 16 months with the
latest uptick the third-quickest in this sequence.
Larger workforces and higher prices for fuel, raw materials,
transportation and other inputs led to another substantial increase in overall
input prices in May. Moreover, firms raised staff wages at the third-strongest
rate in the series history. Higher expenses were passed on to clients with
selling price inflation quickening in May. Lead times shortened to the greatest
extent for five months. As a result, firms received inputs in a timely manner
and were able to reduce their backlogs, as has been the case in each month over
the last two years.
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