Data from the Purchasing Managers’ Index™ (PMI) by Standard Bank shows that in May the private sector remained in contraction territory, with companies continuing to face challenges due to fuel shortages in the domestic market. The report highlights that consumer spending declined, while production and supply chains were disrupted in several businesses.
According to the study, the impact on operational conditions led to a loss of business confidence, with sentiment falling to its lowest level since November 2016. The PMI stood at 49.9 in May, slightly higher than April’s 49.8, but still below the critical neutral threshold of 50.0. This indicates a mild deterioration in private sector health, marking the second consecutive month of contraction.
The report, cited by Club of Mozambique, notes that PMI readings above 50 indicate an improvement in business conditions compared to the previous month, while values below 50 signal deterioration in activity.
Demand conditions remained challenging, with new orders declining for the second consecutive month, albeit at a moderate pace. Fuel shortages were repeatedly cited as a key constraint, limiting both production capacity and customers’ purchasing power.
The deterioration in order books led to a reduction in output, with businesses recording consecutive monthly declines in activity for the first time since January 2025. However, the contraction rate remained marginal, driven mainly by the services, agriculture, wholesale, and retail sectors. In contrast, construction and manufacturing firms increased output in response to stronger sales.
Employment continued to grow in May, extending the job creation streak to 12 months. However, hiring momentum slowed and remained relatively moderate, as declining sales led some companies to reduce headcount. Backlogs of work increased slightly for the first time since October 2025, due to supply disruptions and delayed customer payments, although weak demand freed up capacity in some firms.
Input costs rose at the fastest pace in three months, mainly driven by fuel price pressures, although the overall rate remained moderate by historical standards. Output price inflation fell to its lowest level in ten months, as firms attempted to balance cost increases with weak customer demand.
Standard Bank Mozambique’s Chief Economist, Fáusio Mussá, noted that the employment sub-index has remained above 50 since June 2025, suggesting continued job growth. He said this likely reflects some recovery following post-election disruptions and progress in LNG construction at the Afungi site for the Area 1 project, resumed in January by TotalEnergies in Cabo Delgado province.
However, business sentiment deteriorated further, with the PMI future expectations sub-index reaching its lowest level in nearly a decade. Mussá also warned that the conflict in the Middle East pushed local fuel prices higher in May, increasing inflation risks.
He added that inflation, recorded at 4.4% year-on-year in April, is expected to continue rising, driven by fuel price adjustments.
Source: Diário Económico
