Standard Bank’s Purchasing Managers Index™ (PMI) revealed that there was an improvement in the private sector economy for the fourth consecutive month, against a backdrop of continued expansion in the volume of production and new orders, further describing that in August growth rates strengthened, with the index standing at 50.9.
The document consulted by DE emphasised that indicators above 50.0 point to an improvement in business conditions compared to the previous month, while indicators below 50.0 show a deterioration.
In this sense, based on the August data, the bank pointed out that in the period under review suppliers’ delivery times continued to improve, giving companies more confidence to increase their purchasing activity, and there was also greater pressure from the demand for means of production which resulted in a solid increase in prices, with the general inflation rate reaching its highest value since March 2023.
‘New order volumes increased at a solid pace, which was among the fastest for just over a year. In line with these developments, output expanded to a greater extent than in the previous survey period. Four of the five sectors monitored showed an increase in activity, with construction being the only one to record a decline,’ he explained.
According to the study, in August Mozambican companies reported additional efforts to increase their capacity, which was demonstrated by a further increase in labour numbers, although the rate of job creation slowed compared to July.
“Reserve requirements, persistent fiscal pressures and the intermittent supply of foreign currency indicate that financing conditions will remain restrictive, thereby limiting economic growth outside the extractive sector.We expect TotalEnergies to restart its LNG project next year, which should lead to an improved outlook and some acceleration in GDP growth in the medium term.”
‘Similarly, companies have increased their quantity of purchases, fuelling further growth in inventories of means of production. Improved supply chains have enabled companies to receive their new means of production quickly. Average delivery times fell at a marked pace, little changed from June and July,’ he said.
The PMI revealed that private institutions were more optimistic about next year, with production expectations rising to the highest level in three months.
Commenting on the results, Fáusio Mussá, chief economist at Standard Bank Mozambique, argued that despite remaining volatile, the PMI signalled considerable expansions in production and new orders in August, suggesting that economic activity continues to grow.
‘We note that this growth was mainly driven by the extractive sector (namely liquefied natural gas and coal), which rose 17.5 per cent year-on-year, while the rest of the economy expanded by little more than population growth, with a figure of 2.7 per cent year-on-year in the second quarter of 2024,’ he explained.
Mussá stressed that the BoM had reduced the MIMO key interest rate by a total of 300 basis points since the beginning of the year, to the current level of 14.75 per cent, as a result of lower inflation, which stood at a recent low of 3 per cent year-on-year in July, as well as the prime lending rate, which fell from 23.5 per cent in January to 21.2 per cent in August.
In this sense, he said: ‘We expect the BoM to continue to cut interest rates, even though inflation is expected to rise, but this will continue to be innocuous due to the stability of the US dollar/metical exchange rate.’
‘Reserve requirements, persistent fiscal pressures and the intermittent supply of foreign currency indicate that financing conditions will remain restrictive, thus limiting economic growth outside the extractive sector. We expect TotalEnergies to resume its LNG project next year, which should lead to an improved outlook and some acceleration in GDP growth in the medium term,’ he concluded.
Cleusia Chirindza
