Africa’s Copper producer Zambia’s private sector pulse eased in the month of November according to London IHS Markit website. Headline purchasing managers index (PMI) printed 48.1 (vs 43.7) in October as employment rose. However wage bill and inflationary effects on production costs weighed business activity through higher selling prices. This is the 4th time in a row private sector activity was slowing down. (Prints below 50 represent muted private sector activity while those above 50 signal rise in business activity).
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Stanbic Bank Head Global Markets Victor Chileshe commented: “Higher fuel costs and a weaker currency are some of the reasons attributed by panelists to theory increases of prices of goods and services. This all against a backdrop of dampened demand. Currency stability going forward will be key in keeping input prices and output prices in check. However there is some considerable risk to this given the South African Rands (ZAR) recent gains. Fuel prices are largely expected to hold given the recent pull back in prices globally.”
Gross domestic growth forecast
With (4) months of depressed private sector activity we forecast loss in growth momentum for part of Q3 and Q4 eroding the gains in GDP for H1:18. Cost push effects of a fuel price hike have elevated the manufacturing cost curve reflecting in higher selling prices. Zambia’s private sector is still in the woods with the biggest threat to growth being inflationary pressures. We forecast the copper producer to end the year at 3.6%-3.8% compared to the 3.4% revised World Bank and 4.1% MinFin target. SADC region will have a prolonged dry spell which could dent agriculture productivity affect the overall GDP. However the rise in mining productivity is expected to cushion the adverse effects in turn. Other factors that have impacted business activity are an increase in minimum wage bill. A GDP of 4.1% may be a little ambitious given the last 4 months of muted private sector activity.
