VICTOR CHILESHE
BUUMBA CHIMBULU writes
ZAMBIA’S private sector last month show signs of recovery despite the persistent contraction to record the highest Purchasing Managers’ Index (PMI) reading since the start of the outbreak in March.
This is despite the sector recording further reductions in output, new orders, and employment for the sixth successive month while input costs rose for first time in four months.
Stanbic Bank’s PMI for July 2020 indicates circumstantial evidence suggests Covid-19 remains the main factor affecting business conditions even in July.
Stanbic Bank Head of Global Markets, Victor Chileshe, however said there were signs that the worst of the downturn may have passed with the PMI reading posting its highest reading since March 2020.
Mr Chileshe said in a statement that this was despite the business conditions continuing to deteriorate.
“What we saw in July was that the rates of decline in output and new orders eased further from what we had in May despite business conditions continuing to deteriorate during the month. Operating conditions have now contracted for 17 successive months,” he said.
Mr Chileshe explained that at 44.6, the headline PMI for July recorded a marginal improvement on June’s 42.3.
He however indicated that the figure still represented an overall marked decline in business conditions across the Zambian private sector.
IHS Market Public Relations Manager, Katherine Smith, said her organisation saw a similar trend in business activity which decreased at a noticeable yet softer pace due to the conditions created by Covid-19.
Ms Smith explained that difficulties in securing new orders meant a lack of pressure on operating capacity.
Companies, she said, were therefore able to work through backlogs of work again and scaled back employment for the sixth month running.
“Moreover, the rate of job cuts quickened from that seen in June. Purchasing activity and inventories were also reduced amid a reluctance to hold excess stocks at a time of weak demand and pressure on cash flow,” Ms Smith said.
She noted that Covid-19 continued to impact suppliers’ delivery times, with delays on the delivery of inputs from abroad due to border closures widely reported by firms adding that total input costs ticked up in July for the first time in four months.
Ms Smith said the overall increase was centred on higher purchase prices, which rose due to currency weakness.
