Zambia’s Private Sector Growth Peaks, Nigeria’s Export Orders rise at Sharpest Pace as Kenya’s Business Conditions Deteriorate – Markit PMI
THE November Markit Purchasing Managers Index reveals that Zambia’s private sector activity was at a recprd 33month high at 54.7, that of Nigeria eased to 55.2 signalling strong growth and steep output while Kenya’s 42.8 signalled a decline in business conditions. Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
Africa’s second largest producer of copper Zambia recorded the highest private sector growth pace in 33 months. Zambia recorded a survey high of 54.7 from 53.5 in October signalling improvement in business conditions. Readings that are above 50 represent expansionary growth while those below 50 signal a contractionary pace. The PMI reflected the benefits of monetary policy easing which the Bank of Zambia has embarked on in 2017.
The Central Bank has trimmed the benchmark rate by 525bps (5.25%) to 10.25% to allow private sector growth which had been penalized following December 2015 monetary policy tightening to curb currency slide. The statutory reserve ratio has in the same vein been relaxed 500bps (5%) allowing for excess liquidity in the system to fund lending. The mines have benefited from a rebound in copper pricing on the London Metal Exchange – LME trading for USD$6,826 per metric ton coupled with improved power generation capacity as a result of good rains. Manufacturing has equally received an adrenaline boost following no power disruption and the current ongoing projects which has fuelled appetite for cement and bitumen to mention but a few.
“What the November PMI number is showing is in perfect alignment with the Ministry of Finance’s growth expectations for 2017 at 4.2%,” ZBT Chief Market Analyst said in a research note. As was stated at the Regional Outlook Fiscal Adjustment and Economic Diversification Outlook by the International Monetary Fund on 04 December most Sub Saharan countries Zambia inclusive are on an economic recovery path but with subdued growth owing to sub optimal diversification.
Nigeria Export Order Rise Sharply
Africa’s second largest economy by size after South Africa has record growth of new export orders in November. New export orders rose at sharpest pace since survey began in January 2014. Nigeria headline PMI eased to 55.2 but still signalled strong growth. Steep expansions in both output and new business signalled a further strong improvement in Nigerian private sector business conditions.
Despite easing marginally since October, the latest expansion remained strong in the context of historical data. Steep growth in output, new orders and new export business underpinned the upturn. Notably, the latter rose at a record pace. In terms of inflation, input and output price pressures sharpened during November’s survey. The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration. At 55.2 in November, the latest headline figure eased from 55.8 in October. That said, the index remained well above the long-run average and signalled a strong improvement in operating conditions in the Nigerian private sector. The main findings of the November survey were as follows: New business received by companies rose in November.
Furthermore, new export orders grew at the sharpest rate in the survey’s history, reflecting 12% of the panel noting an improvement since October. Partly reflecting the rise in new orders, output continued to grow at marked pace during November. Furthermore, the most recent data extended the current sequence of expansion to 11 months. In response to higher output requirements, firms continued to hire additional staff during November. Job creation has now been recorded for seven months in a row. That said, the rate of employment growth eased and was below the series’ historical average in November.
Commenting on November’s survey findings, Ayomide Mejabi, Economist at Stanbic IBTC Bank said:
“The Stanbic IBTC Bank PMI continues to signal that the Nigerian economy should continue recovering at a relatively steady pace. The fact that headline PMI eased to 55.2 from 55.8 in October probably reinforces our expectation of a slow and varied economic recovery in 2017. Q3 GDP data recently published by the National Bureau of Statistics clearly suggests that the return to growth has mainly been as a result of improvements in the oil sector. Real GDP growth accelerated to 1.4% y/y in Q3:17 compared to 0.7% y/y in the previous quarter, mainly due to a 25.9% y/y rebound in oil sector growth. The non-oil sector decelerated by 0.8% y/y, a trend which needs to be reversed in order to achieve robust growth levels. Certainly, the fact that the trade sector (amongst others) remained in decline of 1.7% y/y in Q3:17 despite the substantial pick up in dollar availability, suggests that underlying demand remains weak.”
Kenya Business Activity Deteriorates
The Markit PMI revealed that for the month of November, business conditions deteriorate at a slower pace in Kenya. The PMI rose to 42.8 but remained in contraction territory. Sharp, but slower, falls in output and new orders and job shedding quickened to the fastest in the survey’s history of the index for Kenya.
Political instability in Kenya contributed to the seventh consecutive deterioration in business conditions in November. Although at a slower pace, the deterioration in the health of the private sector in November remained marked. Rates of decline in both output and new orders eased from the survey records in October, but the rates of contraction remained sharp. In response to lower output requirements, firms reduced their staffing levels during November. On the price front, cost pressures intensified further during the latest survey period, while firms were unable to fully pass on higher cost burdens to price-sensitive customers. The main findings of the November survey were as follows: Although the seasonally adjusted PMI rose from a survey-record low of 34.4 in October to 42.8 in November, the latest reading signalled the Kenyan private sector economy was entrenched in contraction territory. The headline PMI registered below the neutral 50.0 threshold for a seventh month in succession.
Output at Kenyan private sector firms decreased for the seventh consecutive month during November. Despite easing from October’s recent survey-record decline, the rate of contraction remained sharp overall. Panellists commented on political instability and subdued demand conditions. Mirroring the trend for business activity, new orders fell during November. Although easing to the weakest in four months, the rate of decline was sharp. According to anecdotal evidence, a lower customer turnout and weak Commenting on November survey findings, Jibran Qureishi, Regional Economist E.A at Stanbic Bank said:
“Business conditions deteriorated at a slower pace, thanks in large part to the conjecture by the private sector that the political impasse is now behind us. However, a sustained recovery is only likely from January onwards as firms once again start to build inventories and thereafter expand production. Indeed, lower political risk could provide the platform for Kenya’s private sector to stage a recovery over the near to medium term, more so as good weather conditions have improved growth prospects for the agriculture sector and reduced inflation expectations. ”