COWRY Asset Management Limited has explained that the recently released Purchasing Managers’ Index (PMI) survey report by Central Bank of Nigeria (CBN) showed faster expansions in both manufacturing and non-manufacturing businesses in December 2019 as production level and new orders indices further grew faster.

According to the survey, the manufacturing composite PMI expanded faster to 60.8 index points in December (from 59.3 in November), the sixteenth consecutive expansion. Specifically, the growth in manufacturing composite PMI was due to faster expansion in production level index to 61.8 in December 2019 (from 60.1 in November 2019) which was propelled by expansion in new orders – the index increased to 61.5 in December 2019 (from 59.4 in November 2019). Producers stimulated demand as their selling prices grew slower (output price index declined to 51.9 from 53.1) even as costs of production expanded slower, but marginally shrinking producers’ margins, (input price index fell to 59.2 from 59.3).

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Suppliers of raw materials improved on delivery time of inputs despite increased production level – supplier delivery time index rose to 60.5 in December (from 58.7 in November). Amid improvement at the suppliers’ end, raw materials/work-in-progress expanded faster, to 62.4 from 60.6 as the producers increased their quantity of raw materials purchased – quantity of purchases index expanded faster, to 57.0 from 55.8.

Continuing, it said : “We note that the upward trend in composite PMIs over the last three months in the fourth quarter of 2019 is suggestive of possible higher economic growth rate in 2019. Particularly, sustained growth in new orders and production level further underscores that growth was volume driven amid reduced selling prices.

Nevertheless, we feel economic growth in the first quarter of 2020 would hang in the balance of increasing taxes and the speed of implementation of capital projects which is expected to boost new demand despite the 50% hike in VAT.