Key Findings
- Renewed expansions in output and new orders
- Employment continues to increase
- Rates of inflation soften
The Zambian private sector returned to growth in July amid signs of improving demand which led to rises in new orders and activity. In turn, firms expanded their employment and purchasing activity. Rates of growth were only slight, however, as rising living costs and money shortages limited demand. That said, rates of inflation in input costs and output prices eased over the month.
The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI™). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
The headline PMI moved back above the 50.0 no-change mark in July, posting 50.5 from 49.9 in June. The reading signalled a modest improvement in the health of the private sector, and the first in three months.
Business conditions were supported by renewed expansions in both new orders and output at the start of the third quarter. Companies reported tentative improvements in customer demand and higher footfall, but demand was limited to some extent by rising living costs and money shortages in the economy. As a result, rates of expansion were only marginal.
Companies responded to increasing new orders and higher activity requirements by taking on more staff and expanding purchasing activity. Employment has now risen in four successive months, with only manufacturing posting a reduction in July.
Sustained growth of purchasing activity fed through to a tenth consecutive monthly rise in stocks of inputs.
Despite capacity increases, firms continued to see backlogs of work accumulate, linked to delays in both receiving inputs and distributing products to customers.
Suppliers’ delivery times lengthened for the first time in four months, with respondents mentioning border clearance delays and longer shipping times.
The rate of overall input cost inflation slowed for the third month running from April’s recent high and was only slight in July. Slower increases were seen in both purchase prices and staff costs. An appreciation of the kwacha reportedly helped to alleviate some inflationary pressures.
On the other hand, rising fuel and transportation costs fed through to increases in purchase prices.
In line with the picture for input costs, selling prices also rose at a softer pace, with the latest increase the weakest since February.
Although companies remained optimistic that activity will rise over the coming year, linked to hopes for improved economic conditions, business sentiment dropped in July and was the lowest for a year-and-a-half.