Zambia's private sector contracts for the first time in a year

Investing.com – According to the latest Zambia PMI data released on Wednesday by Stanbic Bank, Zambia’s business conditions declined for the first time in nearly a year in February.

The Purchasing Managers’ Index (PMI) fell from 50.2 in January to 49.3 in February, marking the first deterioration in private sector health since March 2025. Readings below 50.0 indicate a decline in business conditions.

This decline was driven by a contraction in output and new orders, as companies struggled to compete with lower-priced imported goods. The appreciation of the kwacha against the US dollar made foreign goods more affordable, putting pressure on local businesses.

Business activity decreased at the fastest pace since March 2025, with firms reporting a drop in new orders and weaker customer purchasing power. The decline in new business was the sharpest since October 2024 and only the second in nearly a year.

Manufacturing, construction, and wholesale and retail sectors all saw declines in activity and new orders. Agriculture and services sectors experienced expansion.

Total input costs in February decreased, with purchase prices falling for the second consecutive month, the largest drop since May 2020. The strengthening of the kwacha against the US dollar contributed to this decline. Wage expenditures grew slightly, marking the fastest increase in five months.

Zambian companies reduced selling prices in February to boost sales and remain competitive against imports. Although the decrease was small, it was the second-largest since September 2021.

Lower business demand led companies to cut back on input purchases in February, the first decline since March 2025. Firms increased their workforce, though the growth was modest. This helped to further reduce backlogs.

Supplier performance improved in February as reduced purchasing activity eased pressure on suppliers. Decreased input purchases and efforts to cut inventories contributed to stock reductions.

Zambian companies were more optimistic about output over the next year in February. Confidence reached its highest level in four months, supported by expectations of improved demand.

Musenge Komeki, Sales Manager at Stanbic Bank, said despite weakening activity across multiple sectors, businesses expect demand to strengthen in the coming year.

Data was collected from February 10 to 23.

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