Zambia’s private sector slips back into contraction as demand weakens

Zambia’s private sector returned to contraction in May as weakening customer demand and persistent liquidity constraints weighed on business activity, according to the latest Stanbic Bank Zambia Purchasing Managers’ Index (PMI). The PMI declined to 49.3 in May from 51.2 in April, falling below the 50-point benchmark that distinguishes growth from contraction. The reading signals a deterioration in business conditions and marks the first contraction since February.

The survey revealed that subdued consumer spending and limited access to liquidity triggered the steepest decline in new orders since October 2024. Business output also contracted for a second consecutive month, with the construction, wholesale and retail sectors recording the sharpest reductions in activity. In response to the challenging operating environment, firms continued to reduce staffing levels for the third month in a row.

However, many businesses increased purchases and built up inventories in anticipation of improved market conditions in the months ahead. “Firms continued to cut jobs for a third straight month amid subdued business conditions, although they increased purchasing and inventory levels in anticipation of a future recovery,” the report stated. Despite the downturn, business sentiment strengthened considerably.

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Confidence about future activity rose to its highest level since early 2018, driven by expectations of stronger demand and an improving economic outlook. The survey also highlighted mounting inflationary pressures. Higher fuel and transportation costs pushed input prices up at the fastest pace recorded this year, forcing businesses to pass on rising costs to consumers through higher selling prices.

Output price inflation accelerated to its strongest level since April 2025. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express permission from ZAMBIA MONITOR.

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