The rate of job creation in private sector companies in Zambia has quickened to the fastest in more than two years, says Stanbic Bank.
This is contained in the bank’s latest Purchasing Managers Index (PMI) report for August 2017, which was released today by the Head of Global Markets Victor Chileshe.
The reports notes that this added capacity enabled companies to keep on top of workloads. Backlogs of work decreased for the second month running, and to the greatest extent since February.
Mr Chileshe said recent improvements in Zambian private sector business conditions were sustained in August amid further increases in output and new orders. He said companies reacted to higher workloads by taking on extra staff to the greatest extent in over two years. Meanwhile, cost inflation remained historically muted. This enabled companies to lower their output prices as part of efforts to attract customers.
Stanbic has developed the PMI in partnership with a London-based company, IHS Markit, a leading firm in the provision of information and analysis to support the decisionmaking process of businesses and governments around the world.
On the index, readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
For August 2017, the PMI registered above the 50.0 no-change mark for the fourth successive month in August, posting 51.8. Although this was down from 52.5 in July, the reading signalled ongoing improvements in business conditions in the Zambian private sector.
Mr Chileshe said Zambian companies continued to raise output during August, the third month running in which this has been the case. Higher sales were the main factor driving growth of activity, but a positive business environment and a strengthening of the Zambian kwacha were also mentioned.
He said companies reported new orders rising for the fifth month running, and at a solid pace, adding that companies were able to offer discounts due to ongoing muted inflationary pressures. While staff costs rose slightly, purchase prices decreased for the first time since September last year. Firms responded to higher workloads by taking on extra staff for the fourth month running
Survey results also show that purchasing activity increased in response to higher demand, with the rate of expansion quickening from that seen in July. This resulted in a fifth successive monthly expansion of stocks of purchases, with the rate of accumulation remaining solid. Despite the increase in demand for inputs, suppliers reportedly responded well to requests for faster deliveries during August. As a result, vendor lead times shortened for the first time in seven months.
“Business responded to the growth in orders by increasing output and hiring more workers in the month of August. Benign cost inflation enabled firms to lower prices in a bid to attract more customers. The index was lower than July, 51.8 versus 52.5. However, it is the fourth consecutive month that it has signalled improvements in business conditions. The index to some extent provides evidence that efforts to keep inflation in check are beginning to benefit the Zambian private sector and by extension the economy,” Mr Chileshe said.
Commenting earlier, Stanbic Head of Corporate and Investment Banking, Helen Lubamba, said the PMI was Stanbic’s contribution to providing information that businesses and policy makers could use to make informed decisions.
“It gives businesses and businesspeople the best available data to help them make better business and investment decisions. The PMI helps them know whether the business environment is improving, sluggish or declining, which can affect people’s investments,” Ms Lubamba said.
“What the PMI does is that it shows changes in the direction various sectors of the economy are moving on a monthly basis. By providing this information, Stanbic Bank is contributing to informed decision making by businesses operating in Zambia, while the government, policy makers and regulators can use the information to gauge the impact of their policies on the economy,” she added.
The PMI is based on data compiled from monthly replies to questionnaires sent to company executives in private sector companies, which have been carefully selected to accurately represent the true structure of the economy, including manufacturing, mining, services, construction and retail. Survey responses will reflect the change, if any, from month to month.
The PMI has been established in all the major economies of the world as an authoritative and leading indicator of business conditions. It provides the most accurate and most comprehensive suite of economic and key economic indicators, helping policymakers to make well informed decisions as a well as guiding investment strategy and asset allocation.