Private sector growth slows down

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Growth in private sector business conditions recorded their slowest rate of expansion since the first quarter of 2018, according to latest research from Stanbic Bank.

Posting reading 50.3 in July down from 51.9 in June, the headline figure from the Stanbic Bank-IHS Market Purchasing Managers Index (PMI) signalled slight overall growth in the Zambian private sector compared to the previous month.

Contributing to overall growth was a sustained increase in business activity amid expansions in the customer base. In addition, both output and new orders continued to rise, albeit at softer rates compared to June. Despite this however, firms expanded their workforce numbers amid efforts to increase manpower.

The need to increase manpower to meet demand led to a sharper rise in employment from the previous month. The combination of greater workforce numbers and softer new order growth led to a contraction in work-in-hand.

Meanwhile, inflationary pressures continued, with unfavourable exchange rates driving input prices higher. A later increase in average selling prices was observed as firms aimed to improve profits.

Stanbic Bank Head of Global Markets, Victor Chileshe said: “Though the latest rise extended the current sequence of growth to four months, the rate of increase was only marginal reflecting a lack of liquidity in some cases. Though new order growth remained strong due to higher demand, it slowed from June to a five-month low.

Despite a decline in buying, stocks of purchases continued to expand in the Zambian private sector in July. However, stock levels increased by only a marginal amount, with almost 94% of businesses reporting no change. Where an increase was reported, firms linked this to strong demand.”

Unfavourable exchange rates also led to a further rise in purchase prices during July, while efforts to motivate employees caused a subsequent increase in average wages and salaries.

Overall input price inflation remained solid, though cost burdens rose to a lesser extent than in June.

Chileshe added that: “Firms continued to pass on rising costs to customers in July. Average selling prices increased, with survey respondents mentioning efforts to improve profits. That said the rate of output price inflation remained modest.”

Elsewhere, traders seeking to maintain relationships amid stiff competition drove the rate of improvement in delivery times to record highs.

“Vendor performance improved to the greatest extent in the survey’s history. Panel members often mentioned that competition among suppliers was a key factor driving faster delivery times,” he concluded.

Zambia has been experiencing consistent growth in private sector business condition throughout the first half of the Year. And despite facing headwind from the recent cholera outbreak that brought business in most parts of Lusaka to a standstill, unfavourable exchange rates and uncertainty surrounding the IMF bailout package, the country’s economy continues to make steady gains with the private sector playing a significant role in this recovery.

PMI readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration

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