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Mozambique: Activity growth slides to five-month low in August – Standard Bank
1:10 CAT | 06 Sep 2022
File photo: Lusa
Key findings
- Output and new orders rise at slower rates
- Renewed fall in backlogs as hiring expands
- Inflationary pressures ease slightly
Data were collected 12-25 August 2022.
The Mozambique PMI pointed to a sustained slowdown in private sector activity growth in August, reaching the lowest for five months as demand conditions also waned.
Higher workforces were recorded, enabling a renewed fall in backlogs despite weaker stockpiling efforts. The rate of cost inflation remained sharp but eased to a four-month low, leading to a softer rise in output prices. Meanwhile, sentiment picked up from July but stayed below recent trends.
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.
The index recorded a fourth successive monthly drop in August, falling to 50.8 from 51.7 in July. Despite remaining above the crucial 50.0 mark, the index signalled only a marginal improvement in operating conditions that was the softest since March.
The drop in the headline reading was due to weaker growth rates for output, new orders and stocks of purchases in August. Output rose only marginally and to the least extent for five months, with a similar result registered for new business. Firms often noted that demand conditions had softened in the midst of rising prices and an uncertain outlook.
The agriculture sector continued to act as a drag on the Mozambique economy in August, with output falling for the third month running. By contrast, growth was recorded in the manufacturing, construction, wholesale & retail and services categories.
Meanwhile, the continued rise in new orders supported a further increase in employment. The rate of job creation was modest overall and slightly faster than in the previous survey period. As a result, there was a renewed drop in backlogs of work, after rising for the first time in 15 months in July.
Stocks of purchases also expanded in August, although the weaker demand picture meant that the rate of accumulation eased to a five-month low. Concurrently, supplier performance improved to the least extent since March.
Following the recent trend, input costs at Mozambican firms rose at a sharp pace midway through the third quarter, reflecting continued increases in raw material, fuel and labour costs. However, the rate of increase softened slightly for the third month running. Businesses generally opted to pass on price increases to clients, as average prices charged also rose but to a lesser degree.
Finally, business confidence in the year ahead picked up in August, after falling steeply in July following concerns about price rises. That said, it still remained weaker than in the prior 15 months.
Comment
Fáusio Mussá, Chief Economist – Mozambique at Standard Bank commented:
“Standard Bank PMI fell for fourth month in a row to 50.8 in Aug, from 51.7 in Jul, on the account of broad-based month on month declines across the PMI sub-indexes, except for employment, quantity of purchases, new export orders and future expectations.
“This could well reflect a softer GDP growth during Q3:22 as the economy still faces high inflation, last reported at 11.8% in Jul, and subdued disposable incomes.
“Still, having remained above the 50-benchmark for the seventh consecutive month, the PMI suggests that economic growth remains in the positive territory in Q3:22.
“With most of Covid-19 health restriction being lifted in Apr, the economy will likely continue to see growth recovery. Higher donor assistance under IMF’s 3-y USD456m program is also growth supportive.
“The economy grew 4.4% y/y during H1:22, supported by a broad-based recovery. Growth rates were slower for those sectors typically negatively affected by high inflation and tighter monetary policy; this includes trade, construction, property, and manufacturing (but not the aluminium smelter which operates in the export cluster).
“We see inflation rising to 11.8% y/y during H2:22, from 8.2% during H1:22, closing the year at 11.7% y/y. This could see growth decelerating to 4.1% y/y during H2:22, with average growth for the year at 4.2% y/y, a recovery from 2.3% y/y in 2021.”
- You may read / Download the latest Standard Bank Mozambique PMI™, released on September 5. 2022, HERE
Source:
Standard Bank / News Release
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