Private sector activity for the month of May in Africa’s second largest copper producer Zambia slid back into contraction according to Markit Economics Purchasing Managers Index – PMI. Headline PMI marginally ebbed back in contraction at 49.7 in May from an expansionary 50.1 for April as currency weakness continues to wane input costs which then translated to higher selling prices. This signalled a fractional deterioration in business conditions during the month. May reading is the second highest manufacturing pulse Zambia has seen in 27-months.
The headline figure derived from the survey is the Purchasing Managers’ IndexTM (PMITM). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
Read also: Zambia’s private sector pulse expands for the first time in 26-months
Business activity ticked higher in May, ending a 26-month sequence of decline. Although business conditions remained challenging for a number of firms, others indicated that they had raised output in line with recent improvements in customer demand. After also returning to growth in April, new orders took a step back in May, falling marginally. A lack of money in circulation remained a factor limiting new order inflows, according to respondents.
Risks to economic activity include a potential third wave of COVID infections which could impact the supply chains and the labor market while the exchange rate pressures could threaten input prices in the interim. Rising crude prices could widen manufacturing costs to negate the strides the private sector has continued to make.
PEER COMPARISON
Compared with other peers COVID19 third wave fears, additional restrictions and inflationary pressures are key risks to private sector activity homogenous across African nations. Kenya headlined 52.5 for May, a strong recovery from previous months sharp decline in contraction. Kenya was supported by lifting of restrictions as corona virus cases eased. Uganda extended its bullish manufacturing pulse at 56.5 from 57.8 though fears around COVID variants continue to threaten the private sector. Ghana’s seasonally adjusted may reading was 51.5, a slight decline from 52.4 though inflationary pressures persist. South Africa’s PMI headlined 53.2 in May from 53.7 previously as the economy recovers.
The Kwacha Arbitrageur
