Despite business confidence scaling to a 3 month high, reflecting hopes of bullish business activity in the months ahead, Zambia’s factory gauge headlined a second contraction for the month of March. This was on account of liquidity and rising input costs impacting the manufacturing process. Africa’s red metal hotspot has not been spared from the autopsy of geopolitics in Europe centered around the Russo – Ukrainian war that has scaled crude prices higher impacting pump prices in the Southern African nation.
Geopolitics and post pandemic recovery have influenced the supply and demand side of the petroleum markets all resulting in price escalations which has exacerbated manufacturing costs for net importers of the commodity. According to the March Markit Economics report, Zambia’s gauge for manufacturing activity the Purchasing Managers Index headlined 49.6 sliding into the second contraction for the year from 50.3 previous months levels. (50 sets the benchmark for expansion ->50 and expansion -<50). The report cites among other issues lack of money in the system in the period which input costs are rising on the back of rising crude prices as global tensions increase. Waning demand has triggered output levels and subsequently production in the period.
Zambia’s energy regulator, as part of its monthly reviews, effected a 21.0% hike on petroleum products on April 01 following rising international crude prices which analysts predict, could start to erode the base effect gains that have seen Consumer Price Index significantly ebb to 2 year lows of 13.1% from highs of 23.0% a year ago.
COST PRESSURES REMAIN HOMOGENOUS ACROSS ZAMBIA’S PEERS
Zambia’s peers saw similar themes homogenous across and pointed to rising energy and food prices as effects of the Russo – Ukrainian war intensified. Ghana’s March manufacturing gauge slid deeper into contraction to 47.2 from 49.6 previous month while Kenya’s inflationary pressures slowed its March PMI to 50.5 from 52.9. Uganda’s factory activity was marred by cost pressures to headline 51.9 from 55.7 while energy prices scaled Nigeria’s PMI to 54.1 from 57.3. Egypt’s non-oil economy suffered strong decline in business conditions as amplifying energy, food prices and raw materials amidst the Russia – Ukraine war continue to weigh heavily.
The Kwacha Arbitrageur