Mozambique: New business rises at slower rate, dampening job creation and purchasing growth – PMI

New orders rise at softest rate in five months in February Sales growth across the Mozambican private sector economy showed a further loss of momentum in February, slipping to its weakest level in five months, according to the latest PMI® survey data. Businesses responded with a slowdown in job creation and a softer uptick in purchasing, although output levels continued to rise in an effort to clear backlogs. On a positive note, inflationary pressures softened in February, which tempered the rate of selling price increases.

Conversely, firms showed less optimism about future activity, with confidence slipping to its lowest since November 2016. The headline figure derived from the survey is the Purchasing Managers’ IndexTM (PMI®). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

A slightly quicker expansion in business activity helped to lift the PMI to 50.2 in February, after recording at the 50.0 neutral mark in January. The reading signalled a fractional improvement in the health of the domestic private sector. Although order books rose for the fifth month in a row in February, the latest improvement was only marginal and the softest in this sequence.

[paywall]

Survey panellists suggested that customer demand was strong, but payment issues and input shortages curbed growth. The uplift in sales encouraged an expansion in output that was similarly modest in nature. However, this represented a slight acceleration in growth from the beginning of the year.

Staff numbers grew during February, but the rate of expansion softened for the second month running. Businesses also reported a slower increase in purchases. Indeed, the latest uplift was fractional overall, and the weakest recorded in the current seven-month growth sequence.

Firms were nevertheless able to add to their stocks of purchases amid inventory accumulation efforts. Delivery times for inputs decreased solidly in February, marking a whole year of continuous improvement. This in part allowed firms to complete pending orders, resulting in a further decrease in backlogs of work.

After signalling the greatest hike in output prices for over three years in January, February survey data indicated that price pressures were generally more subdued. Charges rose at the slowest rate for four months, while businesses also observed a weaker uptick in their operating expenses. Wage costs increased only slightly, and the rate of purchase price inflation eased markedly since January.

Most notably, Mozambican companies reported lower confidence in the year-ahead outlook in February, with the level of optimism slipping to its weakest for more than nine years. Nevertheless, firms broadly projected an expansion in output, which anecdotal evidence linked to business growth ambitions and hopes of reaching more customers. Panellists also cited the opening of new branches in additional provinces, expanding internationally, and boosting productivity, efficiency and product quality over the next 12 months.

[/paywall]