Zambian Private Sector Activity Slumps to 4-Year Low
Zambian business conditions worsened further as private sector activity declined sharply to over four year low, according to S&P Global Purchasing Manager Index (PMI) data.
The downturn gathered momentum and was the sharpest since August 2020, as output, new orders and employment contracted at steeper rates. the PMI data revealed.
The impact of load shedding and severe power cuts continued to restrict business operations and place strain on capacity, S&P Global said.
It noted that backlogs of work rose at the fastest pace since January 2020, although companies remained upbeat regarding the year-ahead outlook for output, confidence dropped to the lowest in six months.
At the same time, higher supplier and energy costs pushed overall input prices up. Subsequently, firms raised their output charges, with the rate of inflation quickening.
The headline PMI posted 45.6 in September, down notably from 48.3 in August, to signal a strong decline in the health of the Zambian private sector.
The latest data indicated a tenth successive monthly downturn in business conditions, and the fastest deterioration since August 2020.
Load shedding and the impact of lengthy power cuts constrained firms again in September, as output contracted at the sharpest pace since February 2021.
Reduced capacity and lower purchasing power at customers as energy costs rose weighed on demand conditions. New orders declined for the second month running, with the pace of decrease accelerating to the most marked in over four years.
Contractions in output and new orders were broad based by sector. In line with lower new business, Zambian companies reduced their employment numbers and purchasing activity in September.
The fall in input buying followed a slight expansion in August, but was the fastest in three months.
Some companies noted that retrenchment stemmed in part from efforts to lower costs, as inventories were depleted at the steepest rate in over four years.
Capacity issues resulting from unstable energy supplies led to a sixth successive monthly rise in backlogs of work. The rate of growth was the quickest for over four-and-a half years.
Costs relating to electricity supplies and the sourcing of alternative sources of power, alongside higher supplier prices and an appreciation of the dollar, drove input price inflation in September, according to panelists.
The uptick in total costs was led by greater purchase prices, as wage bills were broadly unchanged on the month. Zambian companies sought to protect margins and pass on higher costs to clients, with output charges increasing at the fastest pace in three months.
Although positive overall in their expectations regarding the outlook for output over the coming 12 months, Zambian firms recorded the lowest degree of confidence in six months.
The historically muted level of optimism stemmed from concerns surrounding energy supplies.
Musenge Komeki, Head of Sales at Stanbic Bank commented: “The effects of severe load shedding have clearly been felt by businesses as it has restricted business operations leading to reduced capacity.” #Zambian Private Sector Activity Slumps to 4-Year Low
