An increased avalanche of sentiment into Africa’s second largest copper producers economy, Zambia has given a cue to August private sector pulse. The gauge used to measure factory activity, the Markit Economics Purchasing Managers Index (PMI) levitated to 49.8 in the month of August, 0.5 points from previous months levels. (Readings above >50 signal expansionary while those below <50 are contractionary in growth).
Currency appreciation continues to ease input price inflation pressures as new business orders take shape in a lower pandemic infested environment. The copper currency, the Kwacha continues to extended a winning streak from higher than usual sentiment following an August poll outcome that saw opposition leader (then) Hakainde Hichilema ascend to power as Zambia’s 7th Republican President in a landslide outcome while increased copper prices on the London Metal Exchange (LME) continue to improve the supply side of the foreign currency markets placing the central bank in a stronger position to reign in on volatility. The local unit has rallied 16.9% in the month of August giving import business a significant input cost boost.
With more global market re-openings in the wake of successful vaccination rollout programs, Zambia’s import activity is steadily picking up as productivity takes shape. It is forecast that in the coming months the red metal producer will rebound to positive expansionary territory (>50).
The new regime has committed to boosting private sector activity as it seeks to claw back eroded growth in the coming months through a revive, restore and repair strategy on Zambia. The Bank of Zambia (BOZ) in its pen-ultimate rate decision meeting held rates tad at 8.5% to allow for supportive monetary policy as the economy recovers from an acute third wave induced suppression.
The Kwacha Arbitrageur
