Amidst growing optimism following improving sentiment in Africa’s second largest red metal hotspot Zambia, manufacturing pulse for the month of November scaled to a 3.5 year high as the Markit Economics Purchasing Managers Index (PMI) headlined 51.8 from 51.2 previous month. This was the third expansion in the year 2021 as business conditions improved.
READ ALSO: Zambia’s October Manufacturing Pulse Scales to 44 month High as Business Confidence Soars
Lagged effects of Kwacha appreciation continue to support the current input cost ebb that has contributed to easing selling prices as inflation slows down. Both producer and consumer price indexes are on a declining trajectory despite global pandemic risk autopsy effects from world food prices, supply chain logistic related pressures and an Omicron ‘5th wave’ variant currently being assessed by health authorities for which Zambia has recorded 3 cases as at December 03. Historically epidemiological risks sent Zambia’s private sector pulse to lows of 37.2 in March of 2020 when COVID virus hit the most. Depending on severity of the new variant manufacturing pulse remains at risk though this will be mitigated by more aggressive vaccine efforts despite low compliance in Africa and Zambia as a whole.
READ ALSO: Zambia’s Leader Echoes COVID19 Vaccinomics As Catalyst for Stable Socio-Economic Development
SUBSIDING POLITICAL RISK GAVE PRIVATE SECTOR PULSE A CUE
The red metal producer is reaping dividends of subsiding political risks and recently reached consensus with the Washington based lender on a bailout package for $1.4 billion. This development is expected to boost the copper producers economic outlook through greater liquidity investment flows and a more bullish currency trajectory which in turn could strengthen manufacturing pulse. We forecast a stronger PMI reading in the next months as the Kwacha appreciation latitude widens.
READ ALSO: Zambia See’s Strong Risk Appetite Claw Back as IMF Bailout Talks Conclude
Manufacturing activity is expected to rally further supported by more accommodative tax incentives as a manifestation of the private sector led 2022 budget targeted and effecting growth.
A few threats remain to the operating environment stemming from potentially higher energy prices should electricity and petroleum subsidies be removed following recent hints from the MinFin as the nation optimizes usage of fiscal resources to effect growth. This development could breed further cost push inflationary pressure in the medium term.
READ ALSO: Zambia’s MinFin Head Rethinks Production Possibilities, Hints Fuel Subsidy Scrap
Zambia’s second quarter growth hit 8% from 0.7% in 1Q21 as the economy readies for a rebound post pandemic. The interest rate environment continues to signal yield compression which will likely support the growth of the domestic credit market with lower interest rates.
The Kwacha Arbitrageur