Mozambique’s business activity index ended 2022 with a slight drop, falling from 50.8 to 50 points in December, and the number of new orders stagnated, according to Standard Bank.
“The slowdown led to only marginal increases in output and employment, while input purchases decreased at the sharpest pace since January,” a note from Standard & Poor’s reads concerning the Purchasing Managers’ Index™ (PMI™ )compiled by Standard Bank of Mozambique.
“On a positive note, cost pressures ticked up only slightly from November’s recent low and remained modest, and firms continued to signal a strong degree of optimism towards the year-ahead outlook,” adds the note, quoted by the financial information agency Bloomberg.
S&P gathers data from around 400 companies to determine the health of the private sector in a given economy, illustrating it through the PMI index, in which levels above 50 points signal an improvement in business conditions compared to the previous month, and scores below 50 a deterioration.
The 50 points registered in December signal the end of a sequence of growth that had been registered since February, essentially due to the strong slowdown in the growth of new businesses at the end of the year, with companies registering only a minimal increase compared to the year to November, according to Bloomberg.
For Standard Bank of Mozambique chief economist Fáusio Mussa, the stagnation of the index may be related to measures to combat inflation, namely in terms of monetary policy and the decision not to grant civil servants the traditional end-of-year bonus (“13th salary”).
As workers did not receive a payment, their purchasing power in December was more limited, but there are encouraging signs at the beginning of the new year, the economist said.
“At the 50-benchmark level, the Dec PMI suggests that economic growth was flat in the last month of 2022, after a temporary growth acceleration in Nov. This could well suggest that aggregate demand has softened, as the fight on inflation resulted in a tighter monetary policy. We also noted prudent fiscal spending, which saw the government announcing that the discretionary 13th cheque would not be paid, clearly negatively impacting the purchasing power of public servants. Looking ahead, there are some encouraging signs in the rise in new export orders and in the future expectations sub index, which rose. Most likely this suggests some optimism related to prospects of Total Energies resuming on site construction for its LNG project in 2023, and ongoing strong performances in agriculture and mining, which should continue in 2023,” Mussa wrote.
Standard Bank’s Purchasing Managers’ Index (PMI) is compiled from the responses of purchasing directors at around 400 private sector companies.