Business Activity in Zambia and South Africa Lags Peers

(Bloomberg) -- Currency weakness and tepid economic growth have weighed on business activity in Zambia and South Africa.

Purchasing Managers' Indexes published Monday and Tuesday showed business conditions deteriorated in Zambia and South Africa in July. In Nigeria, Kenya, Ghana, Uganda and Mozambique the indexes remained above the neutral mark of 50, where they've been for most of the past two years, indicating improvement.

While Zambia's July PMI reading is lower than South Africa's, the outlook for business in the copper producer is slightly better.

Sentiment in Zambia was hindered by a poor-performing currency, which pushed up input costs, and a reversal in kwacha weakness should boost business conditions, Victor Chileshe, Stanbic Bank Zambia's head of global markets, said in a report Tuesday. The International Monetary Fund forecasts economic growth of 2% this year, down from an estimated 3.7% in 2018.

In South Africa, a sharp contraction in gross domestic product in the first quarter continues to be a drag on confidence and new orders fell the most in nine months. While a more settled rand in July helped to ease import costs and was good news, according to David Owen, an economist at IHS Markit, the currency lost more than 3% against the dollar since the start of August.

“While second-quarter results point to a slower decline or even modest recovery in the economy, July data suggest that businesses are struggling to achieve further growth at the start of the second half of 2019,” Owen said.

To contact the reporter on this story: Prinesha Naidoo in Johannesburg at pnaidoo7@bloomberg.net

To contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Mike Cohen

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