In the week ahead, Markit economics will release business pulse numbers for most African nations for the month of December. This week, the critical releases were the Caixin/Markit PMI index for China’s factory and manufacturing activity which printed a 19 month low at 49.7 in negative territory from 50.2 in November. December manufacturing activity statistics for other Asian nations such as Taiwan, Singapore also reflected decelerated activity.
Zambia’s private sector pulse has been in negative territory for 4 months starting Aug. to Nov.18 as a consequence of an elevated ‘manufacturing cost curve’ after fuel prices were hiked and law makers adjusted minimum wages higher. This move ballooned manufacturing operating costs. However on the positive side the PMI number over the last two months, has gravitated and narrowed closer to 50 as industrial conditions marginally improve though gains capped by risks to growth in the sector. We forecast that December will print headline number at border line (50) to get Zambia out of the woods. (50 is the borderline between expansionary and contractionary industrial tempo)
A higher copper productivity is expected to offset the effects of higher operating costs from elevated pump prices and a weaker currency which will cap any gains in business activity. H1:19 will support stronger manufacturing pulse from potential easing in fuel prices after the Energy Regulation Board (ERB) reorders crude at suppressed Brent prices. This we project will be the biggest growth stimulus driver.