As US GDP Grows by 2.6% in Q4 2018…
Freshly released Purchasing Managers’ Index (PMI) survey report for February 2019 showed slower expansions in both the manufacturing and non-manufacturing businesses in line with the anticipated decrease in demand in the first few months of the year, as the economy took the back seat in favor of political activities.
According to the survey, the manufacturing composite PMI moderated to 57.1 index points in February 2019 (slower than 58.5 in the preceding month), the twenty third consecutive expansion.
The 1.40 index points fall in manufacturing composite PMI was driven by slower expansion in new orders, to 56.9 in February 2019 (compared to 58.9 in January 2019) leading to slower expansion in production level to 57.5 in February 2019 (from 59.3 in January 2019) and necessitating lower purchase of raw materials/inventories – inventory index moderated to 56.2 (from 59.9 in the preceding month).
Indicative of decreased consumer demand, stock of finished goods expanded faster, to 55.4 (from 52.3 in January 2019). In the same vein, fewer hires were recorded by manufacturers as consumer demand waned – the index for employment slowed to 56.3 points (compared to 56.4 in January 2019).
Amid significant drop in demand for raw materials by manufacturers, raw material prices slowed – input prices fell to 60.9 (from 62.2 in January 2019); although producers still increased selling price – output prices expanded faster, to 53.7 (from 52.5) –, which partly accounted for the decrease in consumer demand.
Of the fourteen manufacturing sub-sectors surveyed, five sub-sectors (or 35.72%) recorded faster expansions (higher than six sub-sectors in the preceding month).
Notably, manufacturers of ‘Electrical equipment’, ‘Transportation equipment’ and ‘Plastics & rubber products’ registered the sharpest expansion in activities of 70.4 (from 58.5), 64.9 (from 53.0) and 59.9 (from 54.0) respectively.
Also, the non-manufacturing sector maintained its growth but at a declining pace as the non-manufacturing composite PMI fell to 58.4 in February 2019 (from 60.1 in January 2019), the twenty second consecutive expansion.
This was partly driven by slower expansion in business activity and incoming business to 59.7 (from 61.7 in January 2019) and 58.6 (from 60.2) respectively; while employment level and work in progress decreased to 57.7 (from 57.3) and 58.2 (from 60.6) respectively.
Notably, activities in ‘Arts, Entertainment & Recreation’, ‘Finance & insurance’ and ‘Transportation & warehousing’ businesses expanded faster to 68.5 (from 66.1), 62.8 (from 62.0), and 58.1 (from 53.9) respectively.
On the global scene, the Commerce Department in the United States reported that the US Gross Domestic Product (GDP) grew y-o-y by 2.6% in Q4 2018, slower than the 3.4% growth recorded in Q3 2018 (but surpassed market expectations of 2.3% growth) amid partial government shut down. However, on a full year basis, the US economy printed a 2.9% growth in 2018 higher than 2.2% registered in 2017.
The growth was engendered by positive contributions from personal consumption expenditures (PCE), non-residential fixed investment, exports, private inventory investment amid tax cuts while federal government spending also increased. The sustained weakness in Nigeria’s business activity in the first two months of 2019, which was in line with our expectation, was due to the subsiding effect of lower elections and festivity spendings.
However, we note that the nation’s manufacturing performance could significantly be improved upon if, amongst other things, the federal government further bridged the infrastructral deficit especially power infrastructure which serve as a bed rock for industrialisation.
Meanwhile, the growth in US GDP which was fueled by substantial tax cuts and government spendings could be loosing momentum in 2019 amid lower revenues in the event of sustained tax cuts withouth commesurate growth in productivity due to trade scuffles.