Business activities rise for second successive month, fastest pace in two years

Business activities in Nigeria rose to the highest in 13 months in January, a new purchasing managers’ index (PMI) has revealed.

The latest monthly PMI by Stanbic IBTC Bank released yesterday, said the recovery in the private sector gathered momentum at the start of this year, with rates of expansion in output and new orders accelerating sharply.

It also revealed that purchasing activity expanded, but difficulties paying staff meant that the rate of job creation eased, contributing to a rise in work backlog.

Showing that headline PMI rose to 54.5 last month from 52.7 in December 2023, expanding for the second time since November, it is above the 50.0 no-change mark for the second month running and signalling a solid improvement in the health of the private sector. Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

The PMI index, which measures the performance of the private sector, is derived from a survey of 400 companies from agriculture, manufacturing, services, construction and retail sectors. It is a composite index based on five individual indexes with the following weights: new orders (30 percent), output (25 percent), employment (20 percent), suppliers’ delivery times (15 percent) and stock of items purchased (10 percent), with the delivery times index inverted so that it moves in a comparable direction.

The report added that business conditions were strengthened and most pronounced in just over a year. “The recovery in new orders which began in December, gathered momentum in January amid reports from panellists of strengthening demand. New business increased sharply, and to the largest degree since April 2022. Business activity also rose for the second successive month in January and at the fastest pace in 21 months.

“All four broad sectors covered by the survey posted improvements in output. In turn, companies also expanded their purchasing activity at a sharp pace, with stocks of inputs up accordingly. Firms were helped in their efforts to secure inputs by quicker deliveries from suppliers.

It added that shorter lead times reflected good relationships with vendors, prompt payments and quiet traffic conditions, pointing out that the accumulation in stocks of purchases in part, reflected plans for further improvements in output in the coming months. “Companies remained optimistic that output will increase over the year ahead and were more confident than in December 2023.”

Revealing further that employment increased at a softer pace in January amid reports that firms had faced challenges paying staff, it said that this contributed to a second successive monthly rise in outstanding business.

“Backlogs increased slightly, but at a faster pace than in December. Rates of inflation remained elevated in January, but showed signs of easing. Purchase prices rose at the softest pace in eight months, but currency weakness and higher costs for fuel and raw materials meant that inflation remained elevated. The rate at which staff costs increased was broadly unchanged from December, as firms helped workers with higher living costs, particularly those related to transportation.”

The report concluded by saying that judging by the trend for input prices, the rate of output charge inflation remained elevated but eased to an eight-month low at the start of this year, showing promise.

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