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

Investing.com – According to the latest Purchasing Managers’ Index data released by Standard Chartered Bank and S&P Global, Zambia’s private sector business conditions declined in February, marking the first decrease in nearly a year.

The PMI fell from 50.2 in January to 49.3 in February, indicating the first deterioration in Zambia’s private sector health since March 2025. Readings below 50.0 signal a decline in business conditions.

This downturn was driven by a renewed contraction in output and new orders, as companies struggled to compete with cheaper imported goods. The appreciation of the kwacha against the US dollar made foreign products more affordable, reducing demand for domestically produced goods.

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

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

Companies reduced procurement activities in February, marking the first decrease since March 2025. Employment only saw a slight increase, although the rise in staff numbers helped to clear backlogs of orders.

Total input costs fell as purchase prices declined for the second consecutive month, the largest drop since May 2020. The more favorable exchange rate of the kwacha against the US dollar contributed to the decrease in procurement prices. Wage expenditures grew at a marginal pace, the fastest in five months.

To boost sales and remain competitive with imports, Zambian companies lowered selling prices in February. Although the reduction was small, it was the second-largest since September 2021.

Reduced procurement activity and efforts to cut inventories led to a decrease in stock levels. Lower input purchases eased pressure on suppliers, resulting in improved supplier performance.

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

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