Private sector grows further

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The Purchasing Managers’ Index (PMI) survey data for April signalled further improvement in the health of the Zambian private sector during the month. According Stanbic Bank, business activity rose for the first time in 2018, as the negative impacts of the recent cholera outbreak continue to subside.

Stronger customer demand enabled firms to win new business at a solid pace resulting in higher purchasing activities and stable employment.

Meanwhile, input costs fell for the first time in 19 months on easing price pressures. There was a slight increase in the rate of output prices, culminating in the slowest rate observed under the current sequence of inflation.

The headline figure for April was 51.2 up from 50.7 in March indicating an overall improvement in business conditions in Zambia’s private sector. The rate of growth was the strongest observed in 2018 after accelerating from March. [Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.]

“An increase in new orders supported a second consecutive month of overall growth. Despite the rate of expansion easing from March, it remained solid and above the series average so far,” said Victor Chileshe, Head of Global Markets at Stanbic Bank. “Furthermore, business activity entered expansion territory for the first time in four months during April. Anecdotal evidence linked the increase to a larger client base and stronger demand.”

He added that: “Having contracted in March, workforce numbers remained unchanged in April while a lack of funds offset any increases caused by the volume of new orders. Further, businesses expanded their purchasing activity in line with efforts to improve operating capacity.”

Meanwhile, supplier delivery times for inputs shortened again at the start of the second quarter, albeit to a lesser extent from the previous month. Improvement in vendor performance was attributed to suppliers’ efforts to improve customer satisfaction. In addition, a drop in purchase prices underpinned a fall in overall input costs in April, as staff costs rose at a marginal pace.

“Contraction in input prices, though modest, was the fastest observed across the series so far. April saw businesses increase their average selling prices for the third month in a row. Efforts to increase profits offset the effects of the fall in costs. That said, the rate of output price inflation was only marginal,” he concluded.

Overall, private sector business conditions maintained the growth trajectory projected in March. As the main inhibiting factors continue to gradually subside, further growth is expected in the private sector in the coming months.

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