EUR 140.56 For Business Accounts Only

Breakfast Report - 07 November 2016

• Perception of business activity has deteriorated every month this year, according to the CBN Purchasing Managers’ Index (PMI) which revealed a Manufacturing PMI reading of 42.5 and 44.1 and a Non-Manufacturing PMI reading of 41.0 and 43.4 for September and October respectively. Nevertheless, the improvement in October’s reading (though still below the “no change” threshold of 50) offers some hope for the final quarter of the year. As PMI is a leading indicator, looking at quarterly data, we get an insight into likely economic performance. Average Manufacturing PMI was 42.9 in Q3 vs. 43.8 in Q2 whilst Non-Manufacturing PMI averaged 42.6 in Q3 vs 43.6 in Q2. The data broadly suggest a persistently weaker business environment as aggregate demand remains depressed, indicating another quarter of strong negative GDP growth following the -2.06% contraction in Q2 (Vetiva Q3 estimate: -1.72%). Consumer spending has been dampened by lower real wages just as investment has stalled on uncertainty and high interest rates. Looking to the end of the year, a ramp up in government spending and an improvement in the current account will be the main drivers of a rebound. We expect both PMI readings to remain below 45 in November as business expectations remain subdued.
• According to the National Bureau of Statistics third quarter Capital Importation report, capital inflows into the country totaled $1.8 billion in the period (Q2: $1 billion), representing the highest amount since the corresponding period in 2015. The improvement was largely driven by an increase in portfolio inflows into bonds (up to $369 million from zero in previous quarter) and money market instruments (up from $57 million to $350 million).
• The Nigerian bourse traded choppy in the past week. The NSE ASI opened the week in negative territory following market reaction to a deluge of weak 9M’16 earnings results. After a brief recovery on Tuesday thanks to a comeback across Tier I banks, the ASI traded downwards for the rest of the week, pressured by declines across select bellwether stocks.
• Save for some late session spikes during Friday’s session, we note that the NSE ASI was on a downward trend over the final hour of trade amidst sell pressure across board. This points to a weak open.