Zambian private sector rebounds after 7 months of purchasing decline
Economy, Opinion

The purchasing manager’s index for February 2018 rose for the first time in 7 months showing signs of recovery, according to Stanbic Bank Zambia’s PMI statement released on the 6th of February 2019.

Production output and new orders increased during the month with staffing levels in companies decreasing fractionally for a consecutive month. The headline figure derived from a survey of Zambian industry showed readings above 50.0 which signalled an improvement in business conditions from the previous month which was below 50.  This marks a 1500 basis points increase since October 2018’s lowest score.

Six Months PMI Data: Source Bloomberg Terminal

Improved output and new orders in February weighed in considerably on the marginal improvement in business sentiment. The recent fuel price reduction coupled with the appreciation of the kwacha against the Rand, over the first quarter, will provide a welcome relief on input costs“, read a statement from Victor Chileshe, Stanbic Zambia’s Head of Global Markets. “The performance of the Rand has a significant impact on input costs. South African products are a significant portion of the import basket”, he further emphasised in an email response to Financial Insight Zambia.

This brings to an end a six month sequence of contraction. However, business continues to be reported as challenging despite panellists seeing output rise which has been attributed to higher customer numbers, read the PMI statement issued by the bank. Furthermore, although new orders increased in February, the decline that was recently experienced by businesses meant that most local companies were still able to deplete backlogs of work during the month. This is why outstanding business fell for the eighth consecutive month in a row at a pace that was broadly similar to what was registered in January.

On the upside, the suppliers delivery times index is showing signs of continued improvement since its weakest point in April 2018 with a number of suppliers’ delivery times shortening during the month under review. Of concern however, is the employment data which indicated that there was a fractional decline in staffing levels in the private sector with some panellists reporting that the lack of work led most businesses to scaling back employment.

About the PMI Survey

The PMI surveys track sentiment among purchasing managers at manufacturing, construction and services firms. An overall sentiment index is generally calculated from the results of queries on production, orders, inventories, employment, and prices.

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