Business conditions improve at softer pace in May – Standard Bank Mozambique PMI™

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Business conditions improve at softer pace in May – Standard Bank Mozambique PMI™

12:10 CAT | 19 Jun 2023

File photo: Lusa

The Standard Bank Mozambique PMI slid to the 50.5 level in May, after rising for three consecutive months to 51.7 in April, the highest level since Jul 22. PMI moderation in May reflects softer growth rates in output, new business and employment.

The PMI index of Mozambican business activity registered its fourth consecutive month in positive territory in May, albeit with a slowdown, announced Standard Bank, which conducts the survey consulted today by Lusa.

The index settled at 50.5 points, that is, “business conditions improved across Mozambique for the fourth month in a row in May, with new expansions recorded in terms of production, sales and employment”.

However, in all of these three evaluated items [production, sales and employment], ” rates of growth softened, resulting in a weaker improvement than April’s recent high [51.7 in April]”, the Standard Bank note reads.

In responses to the monthly survey, “companies reported a further sharp improvement in supply chain performance, helping to keep cost inflation modest and, in turn, selling prices largely unchanged.

“Firms continued to display a strong degree of confidence in future activity, though the level of optimism slipped to the lowest since February,” it adds.

In a comment on the index, Fáusio Mussá, chief economist at Standard Bank in Mozambique, said that the May PMI “indicates that this economy continues to exhibit economic resilience despite adverse weather, monetary policy tightening and fiscal pressures”.

At the sectoral level, he noted “a decline in new orders” in construction, which “translates into a contraction in construction output”.

As for the outlook, “monetary policy tightening to combat inflation and limited foreign exchange supply, combined with inadequate fiscal support, should continue to subdue growth outside of primary activities”.

Fáusio Mussá said that “the market is already experiencing FX liquidity pressures due to a decline in commodity prices and lower FX sales from Banco de Moçambique for fuel imports”.

The Purchasing Managers’ Index (PMI) published by Standard Bank results from the responses of purchasing directors from a panel of around 400 companies in the private sector.

Values above 50 show an improvement in the conditions of the companies, while values below denote a deterioration.