As the month of April comes to a close, Markit Economics is expected to release factory activity gauges for global economies. The releases for bigger economies such as in Asia, US and Europe are being released this week. Next weeks round of releases will cover key African economies. Zambia’s headline Purchasing Managers Index – PMI was last recorded at 48.1 (March) compared to 50.4 the previous month.
Procasti-tax-nation, liquidity and currency risk concerns weighing private sector pulse
The copper producer has for seven (7) straight months been in the red territory as elevated manufacturing cost curves from a higher fuel price and upward minimum wage bill adjustments weighs the sector. The Energy Regulation Board – ERB on 28 February, announced a fuel price reduction for petrol to K15.2pl from K16.06pl (a 5.1% downward adjustment), diesel to K13.4pl from K14.65pl (an 8.33% easing) and LSG eased 7.2% to K15.72pl from K16.94pl. This however, did not give enough support to private sector pulse as aggregate demand was weak with business conditions remaining tough.
Uncertainty in the tax environment was another silent factor that weighed the private sector space in anticipation of a global sales tax change to replace a value added at system on 01 April which was then postponed to 01 July. Liquidity access was another driver of tough business conditions.
Currency risks could exacerbate input inflationary pressure
The month of April was characterized by currency risks that saw the Kwacha slide to K12.7 levels on the back of souring sentiment is forecast to widen manufacturing costs that could impact input and selling prices. The Business Telegraph forecast a headline print of 48.9 – 49.2 for the month of April on account of currency risks exacerbating input inflationary pressures.