Inflation rate to drop and PMI falls further – FSDH Research

FSDH Research expects the inflation rate (year-on-year) to drop to 14.31 per cent in February 2018 from 15.13 per cent recorded in the month of January 2018.

The expected decrease in the inflation rate is largely attributable to the base effect of previous year.

FSDH Research notes that there is a potential increase in local prices of imported food items because of the faster than expected increase in international food prices. This may have negative impact on inflation rate going forward

“Our revised average inflation rate forecast for the year 2018 stands at 10.76% lower than 16.55% in 2017. However, we maintain that the yields on the FGN Bonds will rise, in the short-term, higher than the current levels”.

FSDH Research observed a slowdown for the Purchasing Managers’ Index (PMI) for the second consecutive month.

“The Composite Manufacturing Index (CMI) dropped from 59.3 per cent in December 2017 to 57.3 per cent in January 2018 and to 56.3 per cent in February 2018.

“Although the PMI figures are above 50 points, the slowdown may reflect the rising uncertainties in the country.

“Policy makers and economic mangers in the country need to pay urgent attention to the declining trend in the PMI in order to nip it in the bud”.