Mozambique's private sector growth slowed in February.

Investing.com – Mozambique’s private sector showed signs of weakening growth momentum in February, with Standard Bank Mozambique PMI rising slightly from 50.0 in January to 50.2, data released by S&P Global on Wednesday.

The Purchasing Managers’ Index measures overall economic business conditions, indicating only marginal improvement, with new order growth at its slowest in five months. A reading above 50.0 signals expansion, but the latest data suggests growth remains fragile.

Sales growth slowed for the fifth consecutive month, as companies reported that strong customer demand was offset by payment issues and input shortages. The slowdown in new business growth prompted firms to reduce hiring and cut back on procurement activities.

Employment expanded in February but at a slower pace than the previous month, marking the second consecutive month of hiring slowdown. Procurement growth also slowed, recording the smallest increase within a seven-month expansion period. Despite the slowdown, companies continued to increase inventory levels.

Output growth slightly outpaced January, as firms worked to clear backlogs. Production increased across all five monitored sectors. Delivery times for inputs improved for the twelfth consecutive month, helping firms reduce unfinished work.

Inflation pressures eased in February after surging in January. Purchasing price inflation slowed significantly, while wage costs rose only slightly. Companies raised selling prices at the slowest rate in four months.

Business confidence deteriorated to its lowest level since November 2016. Despite weak sentiment, firms expect output to grow over the next 12 months, citing plans to expand into new provinces, enter international markets, and improve productivity and product quality.

Fáusio Mussá, Chief Economist at Standard Bank Mozambique, stated that adverse weather conditions continue to pressure the private sector this year. He noted that fiscal and foreign exchange liquidity pressures are dampening business sentiment, although progress in IMF funding negotiations and the advancement of liquefied natural gas projects could boost confidence in the second half of 2026.

Inflation fell from 3.2% in December to 3% year-on-year in January, despite month-on-month inflation rising from 0.5% to 1.3%. Food inflation increased from 1.5% in December to 3.1% month-on-month in January, driven by weather impacts on agricultural output.

Standard Bank maintains its inflation forecast of 4.6% by the end of 2026, although Mussá stated that inflation risks have increased, which may lead the Bank of Mozambique to pause its policy rate cuts. The current main lending rate stands at 15.6%.

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.