Business activity PMI index in positive territory for three months

The business activity PMI index in Mozambique remained positive in July for the third consecutive month, signalling “ongoing growth in the country’s private sector”, according to Standard Bank, which conducted the survey released on Monday.

“Companies were able to generate further increases in sales, feeding through to rises in output, employment and purchasing activity. Cost pressures remained muted and companies kept their own selling prices broadly unchanged,” the study reads.

It adds, however, that “the outlook for activity over the coming year” was “less positive”, having “dropped to the weakest since October 2020”.

This index had risen in February (50.7 points), for the first time in five months, then also recording the highest growth since July 2023, but returned to negative territory in March (49.7 points), rising in April (49.9 points). It has been in positive territory since May (50.9 points), but fell in July to 50.6 points, compared to 51.0 points in June.  PMI indicators above 50 points point to an improvement in business conditions compared to the previous month, while indicators below this value show a deterioration.

“New orders increased for the sixth month running in July amid strengthening market demand and the securing of new customers. The rate of expansion eased to a three-month low, however. Likewise, business activity continued to grow at the beginning of the second half of the year, with companies reacting to the increase in the volume of new orders by expanding their production. Similarly, business activity continued to rise as the second half of the year got underway, with firms responding to higher new orders by expanding their output,” the report points out.

However, it is acknowledged that “the growth rate was moderate” in July, adding that the sector data ” indicated that the overall increase in activity was centred on the agriculture, manufacturing and wholesale & retail categories” and that companies “responded to higher new orders by expanding their workforce numbers and purchasing activity”.

“Employment rose for the sixth consecutive month. Despite being modest, the rate of job creation quickened to a level unsurpassed in just over a year. As with output, the agriculture, manufacturing and wholesale & retail sectors were the main sources of rising staffing levels,” it points out. Although “business expansion plans and expected growth of new orders supported confidence in the year-ahead outlook for business activity, sentiment dropped in July to the lowest since October 2020. Exactly 35% of panellists were optimistic in the outlook”.

Quoted in the study released yesterday, Standard Bank Mozambique’s chief economist, Fáusio Mussá, commented that the decline in this index, from June to July, “mostly reflects softer growth in output and new orders, compared with the previous month, and stocks of purchases slipping below the 50-level”.  “Notably, employment continued to rise for the sixth month running, as most sectors continued hiring,” Mussá also highlighted.

The Purchasing Managers Index (PMI) published monthly by Standard Bank is the result of responses from purchasing managers from a panel of around 400 private sector companies.