Private sector business conditions continued to expand at varied pace across several SSA markets

Private sector conditions across several SSA markets continued to expand, albeit at varied pace. Leading the pack once again was Uganda, where conditions continued to expand at a solid pace during July, albeit slower than in the preceding month.

The PMI for Uganda came in at 53.6 versus 56.4 in June. Output and new sales orders expanded across all major sectors, with staffing levels and purchasing activity also rising as firms looked to expand capacity to meet higher demand. Firms also reported an increase in input costs, driven by the rise in prices of building materials, food products, and land as well as higher employee costs.

 Firms indicated that they passed on the higher input costs to consumers. Looking ahead, most firms remained optimistic about the year-ahead outlook, with 89% of respondents predicting further expansion in activity. The next fastest expansion was in Mozambique, where private sector conditions improved at a faster pace than in the preceding month.

 The PMI came in at 51.9 compared with 51.3 in June as robust demand and rising customer numbers bolstered new sales orders. The increase in new business saw firms raise their output and employment levels, albeit modestly. The pick-up in activity was broad-based and most sectors covered in the survey reported an increase in output, except for construction. Firms took advantage of the strong demand environment and passed through higher input costs to consumers. Lastly, firms remained optimistic about the year-ahead outlook, with 45% of the survey respondents expecting an expansion in output.

Private sector conditions expanded at a slower pace in Zambia. PMI stood at 51.0 in July, down marginally from 51.2 in June, with output and new orders continuing to expand. As new orders increased, companies increased staffing levels, which helped them be on top of their workloads.

However, staff costs rose at a faster pace in July than in the prior month although purchase prices were unchanged. The pace of output price inflation eased to the weakest level in the current seven-month sequence of rising charges. Companies remained optimistic that output will increase over the coming year, although sentiment dipped to a three-month low. In Ghana, business conditions improved marginally, with the PMI coming in at 50.5 in July compared with 50.4 in June.

The report showed that new orders increased at a solid pace although it was the softest pace since February. Improving demand and greater confidence in the economy contributed to a further expansion in business activity. Some firms reported muted price pressures, although those that reported higher cost prices linked these to higher prices for fuel and tax increases. Business confidence continued to improve in Ghana, rising for a fifth successive month, which contributed to higher employment. 

Finally, once again bucking the trend seen in other SSA markets, Kenyan business conditions deteriorated further, with the PMI declining to 45.5 in July from 47.8 in June – marking the sixth consecutive month the index has remained in contractionary territory.

 The deterioration in operating conditions was driven by a sharp fall in new business orders, as firms highlighted a drop in client demand due to high living costs. In addition, several firms said that political demonstrations adversely affected sales. Four of the five sectors surveyed recorded a decline in sales, barring agriculture.  On the back of this, firms also reported a sharp drop in output. Price pressures remained severe, with firms citing currency depreciation, higher fuel prices, an increased tax burden and higher employee costs as key drivers of the rise in input costs.

Firms indicated that they passed on the higher input costs to consumers and slowed employment growth. In terms of the outlook, businesses were less upbeat about year-ahead prospects, with only 14% of the survey respondents expecting output to increase over the next 12 months.