Mozambican private sector companies recorded a modest decline in output at the end of the first quarter of the year. The rate of decline was little changed since February and was the thirteenth in as many months.
Companies linked the drop in production to company closures, shortages of raw materials and lower volumes of new orders.
Data contained in a survey called PMI, produced by Standard Bank indicates that in March, most sectors surveyed recorded a monthly drop in activity, with wholesale and retail trade the only ones to record an expansion.
According to Standard Bank, the latest PMI survey data continued to show a slight decline in operating conditions, in Mozambique, in March, as a result of reductions in production, new orders and employment.
“Meanwhile, shortages of raw materials and delays in shipments have reduced the pace of improvement in delivery times and caused a moderate increase in the prices of means of production,” the study argues.
It stresses that companies have passed these costs on to their customers, as demonstrated by the higher rate of increase in output prices over the past year.
In March, the leading indicator of the PMI stood at 49.1, unchanged from February and signalling a slight deterioration in business conditions over the most recent survey period.
Panelists linked the fall to a reduction in the number of new orders, shortages of raw materials and closure of some businesses resulting from the Covid-19 pandemic.
New business also fell, although the rate of decline was only slight as respondents saw an increase in customer demand.
However, the overall drop in activity resulted in a further decrease in acquisition in the month of March.
Additionally, reports suggested that a decrease in raw material supplies had limited purchasing levels for some firms. However, purchasing stocks were little affected and fell only slightly.
The shortage of raw materials led to some suppliers taking longer to make deliveries, and the rate of improvement in supplier performance fell to the lowest level for seven months. Companies also felt that restrictions imposed due to Covid-19 delayed the arrival of procurement stocks.
However, production capacity remained strong, as firms were able to reduce backlogs for the twelfth month in a row. Weaker customer demand led firms to reduce staff numbers and at the highest rate since August 2020.
Cost pressures continued to increase in March, with Mozambican companies reporting that the weakening currency and scarcity of raw materials were key factors.
Companies passed these costs on to their customers to a large extent, as demonstrated by the higher rate of increase in output prices over the last year.
Finally, firms took a more optimistic view on future activity growth in March, although sentiment was weakened by February’s nine-month peak. Plans to expand market share were frequently linked to confidence, with approximately 43% of panel members forecasting an increase in output.
