Zam­bia’s Pri­vate Sec­tor Growth Peaks, Nige­ria’s Ex­port Or­ders rise at Sharpest Pace as Kenya’s Busi­ness Con­di­tions De­te­ri­o­rate – Markit PMI

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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. ”

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