The gains of February 2019 in Purchasing Manager confidence were quickly erased when the March 2019 PMI report was released by Stanbic Bank Zambia in Lusaka.
Following renewed confidence half way through Q1, the signs of a February pick-up suffered a set up as the PMI index score for March posted at a 2 point (or 4.7%) drop to 48.1. Business activity was scaled back in response to a drop in new orders, but firms did increase their staffing levels during the month and were confident that output would expand over the coming year, according to the PMI news release published by the Bank on 3rd April.
“Output and new orders fell in the month of March with panelists attributing this to “lack of money”. The falling demand for inputs saw suppliers reduce their selling prices”, commented Victor Chileshe, Head of Global Markets at Stanbic Bank in Lusaka. “This has been passed on to consumers as evidenced by the marginal increase in output prices in March compared to February. The reduction in demand for inputs by the private sector has been evidenced in the trading of the USD/ZMW pair in March. Most of the demand we have seen has largely been from offshore.” He further added.
March 2019 month on Month inflation rate increased by 110 basis points, according to the March 2019 Central Statistics Report. However, the same report indicated that Year on Year inflation rate for March 2019 had actually slowed down to 7.5%. The decrease in the annual rate of inflation was mainly attributed to Fuels and Lubricants (Diesel and Petrol) and Solid fuels (Charcoal and Firewood), according to the report issued by Acting Director of Census and Statistics at CSO, Goodson Sinyenga.
However, introspection of the CSO report shows that inflation rate for food and non-alcoholic beverages, Health, Alcohol & Tobacco, recreation & culture, education, restaurant & hotel Consumer Price Indices all headed northward. Conversely, southward movement was recorded for clothing & footwear, furnishing, household, housing, and transport.
The fall in PMI and the increase in hard inputs into the supply chain bares a ubiquitous disposition of the past 7 months have been. This has inevitably led to the worsening of operating conditions at the end of the first quarter with reductions in both output and new orders, as indicated by the bank’s report, despite the falls coming after modest improvements in the previous month.
On the upside, employment increased in March for the first time in 3 months. This is due to the upbeat feeling following the February confidence that had purchasing managers increase their forecasts. However, over the coming months, employment figures need to be closely monitored as they are also a key ingredient in measuring PMI.