Private Sector Reports August Downturn

THE month of August was a difficult month for private sector firms in Zambia, with latest survey data from Stanbic Bank and IHS Markit pointing to renewed deterioration in overall business conditions.The main findings of the August survey revealed that at 49.0 in August, down from 50.3 in July, the headline Purchasing Managers Index (PMI) dropped to a six-month low and signaled an overall deterioration in business conditions for the first time since February, but that the rate of decline in business performance was only marginal.The downturn in business performance during August largely reflected modest falls in output volumes and new business intakes.Commenting on August’s survey findings, Victor Chileshe, Head of Global Markets at Stanbic Bank said: “August presented some headlines for businesses. A fall in customer demand, lack of money in circulation and delays in customers selling their accounts are among the things cited for the decline in business activity.”The survey however revealed that despite softer demand conditions, employment increased for the third consecutive month, reflecting sustained efforts to boost business capacity, adding that input buying expanded at the fastest pace since December 2017 with a number of survey respondents citing an expected revival in customer demand in the coming months.“However, firms continue to build capacity by employing more people in anticipation of an improvement in customer demand. Operating costs do continue to rise, and it is a fair expectation that this cost will eventually be passed on to consumers,” Mr Chileshe said.He explained that the worsening business conditions primarily reflected lower levels of output and incoming new work, and that anecdotal evidence cited subdued economic conditions, delays with customer payments and a lack of money in circulation as the main factors holding back client spending in August.Mr Chileshe added that the private sector firms continued to boost their operating capacity during the latest survey period, as signalled by a further modest upturn in staffing levels. Higher employment numbers contributed to the sharpest fall in backlogs of work since April. Shorter lead-times from suppliers also helped to prevent an accumulation of unfinished work at private sector companies in August.The latest improvement in vendor performance was the second-fastest since the survey began in March 2015. Purchasing activity rebounded in August, following a marginal reduction during the previous survey period. Greater input buying partly reflected efforts to build up inventories of raw materials. The latest increase in stocks of purchases was the fastest since December 2017.Meanwhile, average cost burdens continued to rise at a modest pace in August. Higher operating expenses were driven by a combination of rising raw material costs and greater staff wages. Reports from survey respondents suggested that exchange rate depreciation was a key factor leading to increased purchasing prices in August.The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI™). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration. Post Views: 73

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