Mozambique: Business conditions decline at slowest rate for six months – Standard Bank Mozambique PMI™

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Mozambique: Business conditions decline at slowest rate for six months – Standard Bank Mozambique PMI™

4:03 CAT | 22 Oct 2020

in file CoM

Output continues to fall sharply, but rate softens.

Workforce expands for first time since March.

Expectations weaken to near four-year low

Production in Mozambique continues to “fall sharply” in the midst of the Covid-19 pandemic, but the rate of decline has slowed since August, according to Standard Bank’s Purchasing Managers’ Index™.

The headline index rose from 46.1 in August to 46.6 in September.

“The Mozambican private sector economy recorded further sharp declines in activity and demand in September, according to the latest survey data,” a note accompanying the Purchasing Managers’ Index (PMI) reads.

“The overall downturn eased slightly from August, helped by a first increase in employment for six months,” Standard Bank notes. “Nevertheless, the outlook among Mozambican firms worsened to a near four-year low.”

The reading marked “a seventh successive month of decline, albeit the softest since March”.

Coronavirus restrictions “had a further impact on business activity and demand at the end of the third quarter, as a number of surveyed firms reported a drop in client numbers”. As a result, new orders “decreased for the sixth consecutive month, albeit at the softest pace in this period,” the analysis adds.

More positively, notes the report, “Mozambican companies increased hiring during the month, following a five-month period of job losses amid COVID-19 restrictions”.

“The expansion in workforces reflected efforts by some firms to speed up activity. At the same time, businesses saw only a slight drop in backlogs, the weakest for six months. While firms increased employment, there was a more subdued outlook for future activity in September. The degree of confidence for the next 12 months fell to the lowest in nearly four years, amid concerns over the long-run impact of the pandemic,” it states.

Entrepreneurs surveyed by Standard Bank point to renewed improvement in input delivery times, “as suppliers reportedly added capacity in order to win clients”. However, “the improvement offset reports of delays at airports and supply weakness.”

Input prices decreased for the sixth month in a row during September, amid weaker demand for inputs and further cuts to wages.

“However, as was seen in August, deflationary cost pressure was only mild, and far softer than at the height of the pandemic,” the report concludes.

The Standard Bank Mozambique PMI™ is compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of around 400 private sector companies. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services.

Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month. A diffusion index is calculated for each survey variable. The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. The indices are then seasonally adjusted.

The headline figure is the Purchasing Managers’ Index™ (PMI). The PMI is a weighted average of the following five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%). For the PMI calculation the Suppliers’ Delivery Times Index is inverted so that it moves in a comparable direction to the other indices.

Underlying survey data are not revised after publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.

September data were collected 11-25 September 2020.