The Purchasing Managers Index™ (PMI™) from Standard Bank revealed that business activity in Mozambique fell to its lowest level in seven months – from 51.9 points in July, the highest in 13 months, to the basic index of 50.4 in August.
The data is contained in the Monthly Report consulted this Tuesday, 12 September, by DE, which also highlights that the rates of expansion of activities and new business also fell after the records seen in July.
According to Standard Bank, the main figure calculated by the survey is the Purchasing Managers’ Index™ (PMI™), in which values above 50.0 point to an improvement in business conditions in the previous month, while values below 50.0 show a deterioration.
“The decline in the PMI led to a significant slowdown in new business growth, which recorded the lowest figure of the current seven-month expansion period. Several panellists indicated difficulties in acquiring new work, although others managed to secure new clients. However, it should be noted that the weaker rise in sales followed the most solid recovery of the last 14 months in July,” says the report.
According to Standard Bank Mozambique, pointing to the PMI index, Mozambican companies saw less pressure on spending in the period under review as the slight drop in purchase prices helped to offset a further increase in wages. As a result, “companies once again recorded an increase in sales prices, albeit a moderate one”.
For the chief economist at Standard Bank in Mozambique, Fáusio Mussá, this slowdown mainly reflects a sharp drop in the growth of production and new orders, but with job creation registering a moderate increase. In addition, “sales prices and the means of production increased, but more slowly, suggesting a further easing of inflation”.
“Even so, having remained above the reference value of 50, the August PMI suggests that economic activity continues to recover gradually,” emphasised Mussá.
The chief economist at Standard Bank de Moçambique also explained that, in the first half of 2023, a more restrictive policy was generally observed, translated into a pronounced increase in the reserve requirement coefficients, which is expected to produce the desired effect of a slowdown in inflation in the second half of the year, but accompanied by a slowdown in Gross Domestic Product (GDP) that excluded the natural resources sector. Nevertheless, “inflation, which stood at 5.7 per cent year-on-year in July, should have fallen to 5.5 per cent year-on-year in August, in a context of exchange rate stability and the seasonal fall in food inflation”.
In this sense, Fáusio Mussá believes that the combined effect of monetary policy and the fiscal containment measures implemented to resolve wage bill issues and domestic state debt pressures could result in a further slowdown in GDP growth outside the natural resources sector this year.
“GDP growth excluding natural resources decelerated to 2.6 per cent in the first half of 2023 year-on-year, following growth of 3.4 per cent in the second half of 2022 and 4.3 per cent in the first half of 2022. At this point, a slower growth in GDP excluding the natural resources sector seems inevitable, to help alleviate the pressures associated with liquidity in foreign currency, thus promoting the maintenance of the stability of the metical, in a context of ongoing reforms in the foreign exchange market, and a further slowdown in inflation,” he concluded.