Despite the continued weakening of the Kwacha against the US dollar, Zambia’s private sector has continued to record some improvement in their business activities. The PMIs of the last two months have shown a declining rate at which the business activities have been falling. This article will highlight how the private sector has performed in the month of October 2020, through the month’s Purchasing Managers’ Index.
The month of September 2020 showed a slight improvement in the business activities in the Zambian private sector. With a Stanbic bank Zambia PMI of 46.6 in September 2020, even though it still shrunk, it is a better shrinkage as compared to the month of August 2020 which had a PMI of 43.3. The month of September’s PMI seemed to have acted as a hint to the PMI of October 2020. The month of October has recorded the least shrinkage in business activities in 20 months from 46.6 in September 2020 to 48.9 in October 2020; that is just 1.1 shy of a 50 mark.
Trading economics reports that the fall in new orders was slightly in the month of October 2020, while the decline in output was the weakest in 20 months. Further analysis of the PMI shows that the decrease in employment was also the lowest since February 2020, just before the outbreak of Covid -19. With news of a possible approval of a Covid-19 vaccine in the US, this might just be the beginning of a journey to economic recovery. Month to month Inflation rate decreased to 1.3% in October 2020 which is 0.1% improvement from the 1.4% September 2020, as shown by data from ZAMSTAT. The annual inflation rate however, is in the double digits of 16% for October 2020, which is way above the target bracket of 6-8% for 2020. The reduction in month-to-month inflation rate shows that even though selling prices continued to rise, they increased less in the month of October 2020 as compared to September 2020. Business confidence is also said to have improved although it remained below the average.
With the bank of Zambia expected to have its final MPC meeting for the year 2020 soon, the policy rate will most likely be guided by the recent PMIs. It is tempting to suggest that the central bank will most likely leave the policy rate at 8%; it seems like this is when their earlier adjustments have just started taking effect.