The Nigerian private sector experienced a slowdown in growth in July due to steep price pressures, according to the Stanbic IBTC Purchasing Managers’ Index™ (PMI®).
Overall input costs surged to unprecedented levels, leading to a rapid increase in selling prices. As a result, both new orders and business activity saw a softening trend in the second half of the year. Business confidence also hit a new low during this period.
Despite the challenges, there was a positive development in the employment sector. The rate of job creation reached its fastest pace since January, offering some relief amid the overall economic pressures. However, the headline PMI, which tracks business conditions, fell from 53.2 in June to 51.7 in July, indicating a modest strengthening of operating conditions, the least pronounced in the current expansionary sequence.
Output and new orders were also affected during July, experiencing slower growth rates, the weakest since the respective returns to expansion after the cash crisis earlier in the year. Rising customer numbers helped some firms secure new contracts, but many others faced reduced demand due to soaring prices.
Input prices saw a sharp increase, with inflation reaching its joint-fastest rate since January 2014. Higher fuel costs after the subsidy removal and currency weakness were major contributors to the rise in purchase prices. In response, firms raised staff pay to cope with the mounting transport costs. Consequently, output prices surged at one of the strongest rates on record, with over half of companies increasing their charges.
On the employment front, there was a solid increase for the third consecutive month in July, with backlogs of work also rising. However, some firms reported delays as they verified their customers’ ability to pay for orders. Input buying and stocks of purchases increased, but at softened rates.
Despite the challenging conditions, business confidence continued its downward trend in July, reaching the lowest level in over nine-and-a-half years of data collection.