Mar-18 PMI Reading: Another Positive GDP Number In Q1-18?

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The CBN published its Purchasing Managers Index (PMI) survey for the month of March 2018 earlier, showing an improvement in Manufacturing PMI which rose for the 12th consecutive month to 56.7 points amid faster growth in the Production Level, New Orders, Raw Materials/WIP Inventory subindices, as well as moderating growth in Supplier Delivery Time and Employment Level sub-indices.

Similarly, Non-manufacturing PMI improved for the 11th consecutive month rising to 57.2 points. Save for the Level of Employment and Inventory indices
which slowed from 55.3 and 59.8 points to 55.1 and 59.2 points respectively, all other nonmanufacturing sub-indices also grew faster with Business Activity rising the fastest (+5.6%) to 58.7pts.

Juxtaposing the March PMI reading with GDP growth, we believe that the sustained increase observed in the PMI foreshadows another positive GDP growth in Q1-18, factoring in the strong historical relationship (80.2%) between both variables since the PMI series began in 2014. Notably, the PMI has remained comfortably above the 50 points thresholds, indicating robust growth in the real sector as well as encouraging macroeconomic conditions in the overall economy. Looking ahead, we expect a recovery in the services sector to bolster growth amid oil market stability.

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