China’s official factory gauge remained above the dividing line that signals improving conditions for a third month, adding to recent evidence of stabilization in the world’s second-largest economy.
The manufacturing purchasing managers index stood at 50.1 in May, the nation’s statistics agency said Wednesday, matching April’s level and compared with median estimate of 50 in a Bloomberg News survey of economists. The non-manufacturing PMI was at 53.1 compared with 53.5 in April. Numbers above 50 indicate improving conditions.
Fresh signs of resilience will be welcomed by policy makers, after weak April readings raised concerns that a first-quarter stabilization was faltering. Authorities are striving to keep economic growth above 6.5 percent this year while keeping a lid on debt and cutting excess capacity in industries like coal and steel.
“The economy is operating steadily right now, but lacking any upward momentum,” said Tao Dong, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong. “The economy will wane again in the summer, and that will be a key test for the PBOC — can it maintain stable policy and focus on supply-side management,” he said, referring to the People’s Bank of China.
Measures of output and purchases quantity rose, with small and medium-sized enterprises picking up, the manufacturing data showed. For the services gauge, declines in input prices and business activity expectations weighed on the index.
The statistics authority warned about upcoming challenges for manufacturers as a gauge for new orders fell for the second month and the index for new export orders dropped. “Demand remains on the weak side, and the base for growth in the manufacturing sector isn’t solid yet,” the statistics bureau said in a statement released with the data.
A separate PMI reading from Caixin Media and Markit Economics fell to 49.2 in May, matching economists’ estimates and down from 49.4 in April.
The lack of any pick-up in external trade underscores the economy’s reliance on domestic industries, said Iris Pang, senior economist for greater China at Natixis SA in Hong Kong.
“Domestic growth is mostly supported by real estate and related industries such as cement and steel, indicating leverage in zombie companies remains high,” she said. “The situation will continue as monetary policy is relaxed and fiscal stimulus is likely to continue.”
Scarcity of Day-Old-Chicks Cripple Poultry Farmers in Akwa Ibom
Despite billions of Naira spent on Akwa Prime Hatchery and Poultry Limited by the Executive Governor of Akwa Ibom State, Udom Emmanuel, poultry farmers in the state said they had to order day-old-chicks from outside the state as the 200,000 capacity poultry farm developed specifically to make day-old-chicks and other poultry products available at affordable prices is almost empty at the moment.
The farmers expressed frustration over many challenges they face in the course of bringing day-old-chicks from outside the state. Usually, Ibadan, Enugu and sometimes as far as Kaduna, while the hatchery built and inaugurated in 2016 remains idle.
Mr Ekot Akpan, one of the poultry farmers who spoke with the pressmen said the state had not had it this bad.
Akpan said: “For the 12 years that I have been in poultry farming, this is the first time that poultry farmers have been so harshly affected by both economic and non-economic factors. And, quite unfortunately, nobody is available to offer any explanation.
“Farmers have been left at the whims and caprice of owners of the means of production.
“There seems to be no government regulation of the poultry industry. How, do you explain a situation where you wake up suddenly and the price of a day old chick is selling for N600, a bag of feed goes as high as N6,000.
“And, in a state that government claims to be pursuing agriculture as one of his cardinal programmes.
“For instance, in 2016, the state government said it has constructed an hatchery, and the intention according the government was to ensure availability of day old chicks at affordable price to farmers, but, quite, unfortunately, that effort has not yielded any tangible result.
“Farmers are still getting their day old chicks from Ibadan, Kaduna, and Enugu. So, the question now is where is the hatchery?
“One would have expected that farmers would be buying old chicks at humane prices, but, from all indications they acclaimed hatchery is a ruse. So, which one is the Akwa Prime Hatchery producing,” he said.
CBN Predicts 2 Percent Growth for Nigeria in 2021
Despite the economic recession and numerous uncertainties encompassing Nigeria in recent months, the Central Bank of Nigeria (CBN) has said the nation will grow by 2 percent in 2021.
Speaking at the 2020 bankers’ dinner organised by the Chartered Institute of Bankers of Nigeria (CIBN), Godwin Emefiele, the Governor, CBN, said implemented government intervention programmes will aid the nation’s recovery by next year.
Emefiele further stated that the intervention efforts represent around 3.5 percent of Nigeria’s current Gross Domestic Product (GDP).
He said, “Our actions in 2021 would be guided by the considerations that emerged from the Monetary Policy Committee meeting of November 23 & 24, 2020, which sought to address the major headwinds exerting downward pressure on output growth and upward pressure on domestic prices.”
On fast declining foreign reserves, the Governor said the institution has adopted a demand management framework designed to boost the production of items that can be produced locally and aid conservation of external reserves.
“Due to the unprecedented nature of the shock, we continued to favour a gradual liberalisation of the foreign exchange market in order to smoothen exchange rate volatility and mitigate the impact which rapid changes in the exchange rate could have on key macro-economic variables,” Emefiele stated.
The CBN projection came few weeks after the National Bureau of Statistics (NBS)’s report showed Africa’s largest economy contracted by 3.62 percent in the third quarter following a 6.10 percent decline posted in the second quarter. Nigeria officially slid into the worse economic recession in almost 30 years and the second economic recession under the current administration.
While, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, has projected that Nigeria would rebound from the recession in this final quarter or the very first quarter of 2021, falling revenue generation, rising capital flight amid weak demand due to the negative impact of coronavirus on earnings, household incomes and lack of jobs remain a concern.
COVID-19 Vaccine: Crude Oil Extends Gain to $48 Per Barrel on Wednesday
Oil prices rose further on Wednesday as hope for an effective COVID-19 vaccine and the news that the United States of America’s President-elect, Joe Biden has begun transition to the White House bolstered crude oil demand.
Brent crude oil, a Nigerian type of oil, gained 1.63 percent or 78 cents to $48.64 per barrel at 11:50 am Nigerian time on Wednesday.
The United States West Texas Intermediate (WTI) crude oil rose by 1.36 percent or 61 cents to $45.52 per barrel.
OPEC Basket surged the most in terms of gain, adding 3.16 percent or $1.37 to $44.75 per barrel.
This was after AstraZeneca, Moderna and Pfizer-BioNTech announced the positive results of their trials.
Moderna and Pfizer had claimed over 90 percent effective rate in trials while AstraZeneca said its COVID-19 vaccine was 70 percent effective in trials but could hit 90 percent going forward.
“The possibility of having a vaccine next year increases the odds that we’re going to see demand return in the new year,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
Also, the decision of President-elect Joe Biden to bring Janet Yellen, the former Chair of Federal Reserve, back as a Treasury Secretary of the United States is fueling demand and strong confidence across global financial markets.
“President-elect Biden’s cabinet choices, particularly Janet Yellen’s Treasury Secretary position, are adding to upside momentum across a broad space of asset classes,” said Jim Ritterbusch of Ritterbusch and Associates.
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