…As firms report sharpest increase in input prices for 20 months and slower reduction in new business.
LUSAKA, ZAMBIA – Following a sharp fall in business conditions the previous month, November brought some much-needed respite for private sector companies in Zambia according to Stanbic Bank Zambia’s latest Purchasing Managers’ Index.
Although the health of the private sector continued to decline over all, the rate of deterioration eased noticeably on the back of slower reductions in output and new orders.
Overall input prices increased to the greatest extent since March 2017, with companies raising their output charges markedly in response.
The Purchasing Managers Index (PMI) for November was 48.1, slightly below the 50.0 no change mark for the fourth month running. Nevertheless, this signalled a modest decline in the health of the Zambian private sector.
Stanbic Bank Head of Global Markets, Victor Chileshe said, “At 48.1, November’s PMI was much higher than the 43.7 seen in October as the rate of deterioration moderated. Last month, the rates of decline in both output – for the fourth successive month – and new orders slowed sharply.
Additionally, survey panellists reported ongoing demand weakness and a lack of money in the economy, but to a less severe degree than in October.”
Meanwhile, employment continued to increase for the sixth consecutive month while inflationary pressures remained high during the November.
“The rate of job creation was modest but picked up from that seen in October meaning that there were gains in staffing levels for six months straight. This suggested companies see the current difficulties as being only temporary,” Chileshe said.
Further, the rate of overall input price inflation accelerated for the second month in a row. The marked increase was the fastest since March 2017. Both purchase prices and staff costs rose at stronger rates in November.
Chileshe noted that “respondents cited a depreciation of the kwacha against the US dollar and higher fuel costs as the driving factors behind the increases in purchase prices. They also added that the recent revision to the minimum wage was central to rising staff costs.”
Companies responded to higher input costs by raising their output prices again in November. The rate of inflation was sharp, having eased only slightly from the 35-month high seen in October.
Purchasing activity decreased fractionally, while inventories were broadly unchanged as companies were reluctant to hold stocks.
Suppliers were again able to reduce their delivery times thereby extending the current sequence of improvement to one year.
“Considering High fuel costs and a weaker currency against a backdrop of dampened demand are some of the reasons attributed by panellists to the increase in
the prices of their goods and services, going forward currency stability will be key in keeping input prices and in turn output prices in check,” Explained Chileshe.
“However, there is some considerable risk to this given the South African Rand’s recent gains while fuel prices are largely expected to hold given the recent pullback in prices globally. It is also encouraging to note that the general perception of the private sector is that the current difficulties the country is facing are temporal which means we may witness some growth in the health of business conditions soon,” he concluded.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.