Business activity in January remained subdued – Stanbic

The Zambian economy continued to be characterised by decreased business activity in January, 2019, mainly attributed to slow sales and lack of money in circulation, according to Stanbic Bank Zambia’s latest Purchasing Managers’ Index (PMI) Survey.

According to the latest Stanbic Bank Zambia PMI report released this month, business activity remains subdued largely due to low consumer sales and little money in circulation.

“A weaker fall in new orders was registered in January, with the rate of contraction easing for the third consecutive month to the slowest since last September. Some panellists reported a continued lack of customers, although others indicated that they had been able to secure new clients. Slow sales and a lack of money in circulation were reportedly behind the latest reduction in business activity – the sixth in as many months. Output fell at a solid pace, albeit one that was weaker than in December, in line with a softer decline in new orders,” the report revealed.

“Companies in Zambia continued to reduce their outstanding business in January amid a further reduction in new orders. Backlogs of work have fallen in each month since July last year. Sustained reductions in workloads brought an end to a six month period of job creation in January as employment decreased fractionally during the month.”

It also noted slow business activity in purchasing activities.

“Purchasing activity decreased for the third time in the past four months, with inventories also falling as companies displayed a reluctance to hold stocks amid reducing new orders. The length of time taken for vendors to deliver items shortened again, with reports suggesting that regular suppliers remained reliable,” it stated.

“Overall input costs increased sharply again at the start of the year amid a marked rise in purchase prices and modest staff cost inflation. Where purchase prices increased, panellists mentioned higher fuel costs as well as weakness of the kwacha against the US dollar.”

Although data shows a slight improvement in business conditions between December and January, the Survey findings, as illustrated through the PMI, revealed a sustained deterioration in business conditions during the first month of the New Year.

“The headline figure derived from the Survey is the PMI. Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration. At 48.1, the PMI continued to signal deteriorating economic conditions during January extending the current sequence of decline to six months. That said, the reading was up from 47.8 in December to indicate a slightly softer contraction,” data revealed.

And commenting on the Survey’s findings, Stanbic Bank Zambia’s head of global markets Victor Chileshe stated that consumer inflation may subside due to the relative stability of the kwacha against major currency convertibles.

“Although higher fuel prices and currency weakness resulted in a sharp monthly increase in input costs, the rate of output price inflation moderated, which may be a sign that threats to a rise in consumer inflation are subsiding, especially since USD-ZMW remains stable,” stated Chileshe.

The Stanbic Bank Zambia PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in approximately 400 private sector companies, which have been carefully selected to accurately represent the true structure of the Zambian economy, including agriculture and construction, among others.

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