Zambia’s consumer price index for the month of August spiraled to 9.3%, 50 basis points from 8.8% in the mont of July. This was contained in a communique by the Central Statistics Office (CSO) in Lusaka the capital. The copper producer currently grapples with an energy deficit whose effects have transmitted to Business environment elevating the operational cost environment impacting the pricing architecture across the board. Drought effects have resulted in an upward food price trajectory that has fueled inflation to a 3 year high to levels last seen in November 2016.
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The central bank in its August monetary policy sitting forecast elevated inflation over the next 8 quarters exacerbated by underlying risks to growth graviting around the energy bottleneck effects and food price risks as an autopsy of drought.
With the central bank monetary policy being inflation targeted, the likelihood of a November rate hike is steadily rising if effects are to be curbed effectively. An emergency MPC meetings can not be ruled out if the macros dislocate any further.
With a lowered credit assessment to CCC+ by Standards and Poor’s (S&P) asset sell-off pressure will be the biggest currency risk driver on the back of waning investor confidence as offshore players and investors question Zambia fiscal consolidation efforts.
Business pulse readings are expected next week when Markit Economics/Stanbic PMI headline print is released on 04 September at 10.30pm where expectations of a deeper slide into contraction are anticipated on the back of record input inflation and lack of liquidity as weighing factors. Zambia’s July index printed at 44.4 from 46.6 a month earlier.
Compiled by the BT Research Team
