Standard Bank Mozambique PMI: Output levels improve again in March, but employment falls

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Standard Bank Mozambique PMI: Output levels improve again in March, but employment falls

11:16 CAT | 08 Apr 2025

File photo: Lusa

Output and new orders rise for second month running

Staffing decreases at quickest rate since mid-2020

Costs and charges increase further

Operating conditions in Mozambique strengthened for the second month in a row in March, with increased sales driving a further rise in business activity. Firms subsequently expanded their purchasing activity and stocks of inputs. However, there was a renewed drop in employment, which was the fastest in almost five years and contributed to a softening of overall growth.

The headline figure derived from the survey is the Purchasing Managers’ Index TM (PMI®). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

The PMI registered 50.2 in March, from 50.9 in February, signalling an upturn in the health of the private sector economy for the second month running. The improvement in business conditions was influenced by increases in output, new orders and inventories, but it was slightly restrained by lower employment and a shortening of delivery times.

The latest survey data indicated that more stable economic conditions had bolstered sales at Mozambican firms in March. Volumes of new work rose at the quickest pace since October 2024, although the upturn was broadly aligned with the series long-run trend.

Rising order book intakes enabled firms to expand their activity for the second month in a row. Growth was recorded in the services, wholesale & retail and agriculture sectors, contrasting with downturns in construction and manufacturing.

Expectations for future business activity also improved, with confidence ticking up to the highest for seven months.

According to anecdotal reports, plans to boost activity often involved expanding customer numbers, increasing exports and hiring more people.

Nevertheless, March data indicated a fall in employment at Mozambican firms, following two months of job creation.

Some panellists reportedly shed staff as they were typically able to clear backlogs, while others cited the non-replacement of leavers.

Although modest, the decline in employment was the strongest recorded since June 2020.

Lower workforce numbers helped to curb staff costs in March, partly offsetting an increase in purchase prices associated with rising material demand. As a result, the overall rate of input price inflation softened from February’s 29-month high and was moderate. Increased input costs were partially passed on to customers through a marginal uplift in selling prices.

Meanwhile, Mozambican firms continued to expand their purchasing activity and increase their stocks during March, finalising a full quarter of growth in both metrics. Inputs were generally purchased in greater amounts due to rising new orders. That said, the latest expansion was slower than in February and only marginal.

Positively for businesses, supplier lead times shortened for the first time in five months. Albeit only slight, the improvement was frequently attributed to an easing of supplier disruption caused by recent protests. The sectoral impact was disparate though, with three out of five categories registering an improvement: namely agriculture, wholesale & retail and services.

Comment

Fáusio Mussá, Chief Economist- Mozambique at Standard Bank commented:

“The Standard Bank Mozambique PMI fell to 50.2 (seasonally adjusted) in March, from 50.9 in February, after having remained in negative territory from November to January. There were month-on-month (m/m) expansions in output, new orders, purchases and supplier delivery times, but a contraction in employment.

“While PMI prints above the 50-benchmark suggest month-on-month growth in private sector business activity, we still see GDP growth in negative territory in the first quarter of 2025, turning positive from the second quarter onwards and implying a slow growth recovery from the negative impact of the protests that followed the October 2024 election.

“Notably, business sentiment is slowly improving. The PMI future business expectations sub-index rose in March, but with the degree of optimism below its long-run average. After all, ongoing foreign exchange (FX) liquidity and fiscal pressures imply a challenging macroeconomic environment.

“The Banco de Moçambique continues to cut policy rates, suggesting that despite the risks to the outlook, the Monetary Policy Committee is confident that inflation will remain at single digit levels. This is consistent with the view of the USD/ MZM pair remaining stable in the shortterm, implying a disconnect between the FX rate and ongoing FX supply-demand imbalances in the market.

“We now forecast the MIMO policy interest rate being cut to a single digit level of 9.75% before the end of 2025, down from the current level of 11.75%, which implies the prime lending interest rate falling towards 16% by year end. Lower interest rates would go a long way in supporting the economy recovery.”