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Manufacturing Sector Contracts in August Amid Growing Economic Uncertainties

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Economic Uncertainties Weigh on Manufacturing Sector in August

The Central Bank of Nigeria (CBN) on Thursday said the nation’s manufacturing sector contracted for fourth consecutive months in August.

The Manufacturing Purchasing Managers’ Index, which measures activities in the manufacturing sector, stood at 48.5 index points in the month of August. Below the 50 threshold that separates expansion from contraction.

According to the report, only 6 subsectors out of the 14 subsectors surveyed recorded expansion above 50 thresholds in the month under review. The subsectors are in the following order: nonmetallic mineral products; cement; plastics & rubber products; transportation equipment; chemical & pharmaceutical products and textile, apparel, leather & footwear.

While the remaining 8 subsectors contracted in the following order: printing & related support activities; electrical equipment; petroleum & coal products; primary metal; furniture & related products; paper products; food, beverage & tobacco products; and fabricated metal products.

Similarly, production in the manufacturing sector contracted at 49.2 points in the month of August as only 5 subsectors recorded expansion in production with 3 subsectors remaining unchanged from the previous. The remaining 6 subsectors posted contraction in production.

Again, demand in the sector remained weak as new orders stood at 49.2 points in the month under review. Suggesting that despite the low productivity and drop in output, demand remains generally weak.

Six subsectors reported expansion in new orders, 2 subsectors maintained same level, while 6 recorded contraction in the review month,” the report noted.

Also, job creation in the manufacturing sector continues to drop at 44.6 points, reflecting the series of economic uncertainties brought about by the COVID-19 pandemic in recent months.

In the report, the CBN said “The employment level index for August 2020 stood at 44.6 points, indicating contraction in employment level for the fifth consecutive months. Of the 14 subsectors, 2 subsectors recorded expansion in employment level in the review month; 3 subsectors recorded same level of employment, while the remaining 9 subsectors recorded lower employment level in the review month.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.