Manufacturing pulse in Africa’s copper producer Zambia is back in expansionary zone after two months of contraction. According to the Markit Economics purchasing managers index, factory activity in the red metal producer scaled above 50 to headline 50.5 for the month of July, from the previous months 49.9 after an earlier slump further to 49.6 in May. This turn around was supported by a business confidence rebound. Fifty (50) remains the benchmark for expansion (>50) and contraction (<50).
Zambia’s economic fortunes face optimism as the Southern Africa nation is on the cusp of a bailout deal with the Washington based lender, the International Monetary Fund following clarity around assurances by bilateral creditors. This has continued to fuel business activity on the back of a stronger local currency that has eased input inflationary pressures to some extent despite persistent petroleum price pressures as global crude trades in the 90’s per barrel weighed by softer demand and recessionary fears in the wake of global uncertainty.
Rays of risk appetite across the sectors is evident given increased investment in the agribusiness sectors as key players leverage off dislocated grain markets to widen exports. Other sectors seeing uptick in investment are mining as the world decarbonizes supported by the electric car era and renewable energy demand spike. Demand has been seen to be climb as the economy continues to claw back lost pre-pandemic growth.
Downside risks however stem from cash shortages in liquidity access and higher cost of living. Inflation has been on a downward trajectory for over a year to single digit towards the central bank’s target band but has started to scale higher with a 20 point climb to 9.9% for July. Petroleum prices were 9.1% higher for July after which August will see 13.3% lower fuel prices to ease production costs.
Overall cost push inflation decelerated for the third time from Aprils highs supported by Kwacha rally in the period the report carried.
Elections, elevated crude and currency woes weigh peer performance
Compared to its peers, Ghana remains in contraction at 48.5 as petroleum price pressure and Cedi weakness weigh while the political climate in Kenya pre elections compressed manufacturing activity to 46.3 from 46.8 in the wake of uncertainty that dented the Shilling and general business activity. Despite severity in cost pressures in South Africa occasioned by rolling blackouts, the continents most industrialized economy has remained resilient for seven straight months posting 52.7 in July backed by new order volumes irrespective. Non-oil business activity for Egypt grapples with decline in new orders which coupled with energy price pressures has kept the PMI softer at 46.4.
The Kwacha Arbitrageur