Africa’s second largest copper hotspot recorded a slide in its May private sector momentum as price pressures continue to weigh in the wake of fuel price volatility. According to Markit Economics May release, Zambia’s purchasing managers index (PMI) slid back into contraction 0.7 points to 49.8 the third contraction of the year. Readings above 50 reflect expansion while those below 50 reflect contraction.
READ ALSO: Zambia’s April Private Sector Activity Rebounds, Petroleum Price Pressures Persist
The Southern African nation continues to bear the brunt of the supply constraints in the global crude market as a consequence of the autopsy of the the war in Eastern Europe. Being a net importer of the commodity upward price pressure continues to weigh manufacturing agriculture and construction with producers passing costs to consumers thereby scaling selling pressures.
“Weakness in operating conditions stemmed from renewed reductions in output and new orders, which both ticked down following slight increases in the previous month. Price rises, money shortages and unfavourable exchange rate movements acted to limit the ability of firms to secure new orders and expand activity, with customers sometimes struggling to fund projects,” the Markit Economics report carried.
PETROLEUM PRICE PRESSURES PERSIST ACROSS
Price pressures remains a homogenous theme across Zambia’s peers in May as Ghana private sector demand was dented by fast rising selling prices with it PMI sagging deeper in contraction to 47.4 from 48.3 in previous month while South Africa showed some recovery from the floods, load-shedding and dampened business confidence after its manufacturing pulse scaled to 50.7 from 50.3 in April.
Business activity fell sharply in Kenya to 48.2 in May from 49.5 as inflation accelerated on petroleum cost hikes while Egypts headline seasonally adjusted S&P Global PMI non-oil private sector economy – posted at 47.0 in May, up slightly from 46.9 in April still in contraction.
READ ALSO: Goldman raises Brent price outlook on unresolved supply deficit
With Brent and NYMEX crude contracts pointing north of $120 a barrel continue to dim the energy outlook on the back of supply deficits. Goldman Sachs added a $10 additional cost per barrel in its 2H22 forecast to $135 which could hurt oil importing economies and could further force governments to subsidize fuel. Petroleum price pressures could persist much longer than anticipated.
The Kwacha Arbitrageur