Manufacturing sector dey face serious challenges for the fourth quarter of 2024, according to recent economic reports. The ISM Manufacturing index, which measures activity in the manufacturing sector, remain soft at 47.2 for September, indicating contraction for the seventh month out of the last ten.
The new orders index came in at 46.1, and has been in contraction for all but two months over the last two years. This show say demand dey weak, and manufacturing companies dey adjust their production accordingly. The production index stabilize at 49.8 after falling to the lowest level since the COVID lockdowns in August.
Manufacturing companies have been managing to survive despite weak demand by focusing on their order backlogs, which were artificially boosted with pent-up activity from the COVID years. However, this reprieve for weaker demand no go last forever. The employment index fall to a very weak 43.9, close to the lowest level since the COVID lockdown months.
The continued weakness in the manufacturing sector dey linked to the reductions in the M2 measure of the money supply from early 2022 through late 2023. Although M2 dey increase at a moderate pace in recent months, it still lower than it was two years ago. These lagged impacts dey finally make their way into the inflation data, with the prices index falling into contraction territory for the first time this year.
Experts expect inflationary pressures in the manufacturing sector to decline in the latter part of 2024, along with continued manufacturing weakness, as tighter monetary policy from the last two years take hold. This mean say the road ahead no go be smooth for manufacturing companies.
