November 2020 PMI Nears the 50 Mark!
Economy, Opinion

As the year 2020 nears its end, business conditions in Zambia are almost reaching the point of stabilization with the November 2020 PMI almost touching the 50 mark.
At 49.3, the month of November 2020 PMI indicates the smallest contraction in the private sector business activities since February 2019. This is the highest that PMI has ever reached in Covid era.
Although the Zambian economy has been unable to score a 50 mark since February 2019, the past three months have shown a reduction in the rate at which it has been contracting since the advent of Covid-19.
September 2020’s PMI was at 46.6, which was an increase of 3.2 from the 43.4 of the prior month. The September increase was then proceeded by another increase in the month of October where PMI was recorded at 48.9, a record high in 20 months at the time. This is evidence that industries are finding a new normal.
The year 2020 has been a very challenging year for businesses thus it is quite exciting to note that there are signs of recovery now. Data from the Stanbic Bank news release shows that new orders decreased slightly in the month of November, owing to the fact that conditions remained challenging, mostly due to the Covid-19. The report however, further highlights that there were some reports of improving customer demands and that these signs of improvement have in turn necessitated output nearing the point of stabilization.
One other thing to note is the continued depreciation of the kwacha against the US dollar. Owing to the fact that most Zambian businesses rely mostly on imports for their inputs, the depreciation of the kwacha has accelerated their costs. Information from the news release by Stanbic Bank Zambia PMI, agrees with point when it states, “the weakness of the Zambian kwacha against the US dollar was the principle cause of a successive increase in the purchase costs of inputs.”
In a bid to manage their input costs, that effort led to the fall in employment as a result, the month of November saw the rate of job cuts quicken more as compared to October 2020.
With the bank of Zambia having maintained its policy rate at 8%, it might have just been for the best in order to watch how market conditions unfold in the coming months until the next monetary policy committee meeting to be held in the first quarter of 2021.

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