Standard Bank's new monthly Purchasing Managers Index (PMI) survey report reveals that Mozambican private sector companies saw a slowdown in new business growth in the middle of the year, with sharp increases in fuel prices and production charges generating lower customer demand.

However, the latest report reveals that activity and the rise in employment continued to accelerate, which helped companies clear the backlog, while the forecast for next year remained strongly positive.

According to the report, values above 50.0 point to an improvement in business conditions in the previous month, while values below 50.0 show a deterioration.

The PMI indicator dropped from 52.4 in May to 52.0 in June, indicating a modest but slightly moderate improvement in the health of Mozambique's private sector economy.

"The index has remained above the neutral value of 50.0 for five consecutive months. The decline in the core value stemmed primarily from a weaker increase in new orders in June, with growth slowing for the first time in three months," the report reads.

Standard Bank's PMI survey also finds that demand continued to increase overall, helped by recovering economic conditions, but there were signs that price pressures have begun to dampen customer orders.

"Despite this, companies increased their production levels at the fastest pace since October 2017 and bet on hiring activity. Consequently, the largest decrease in order backlogs since the beginning of the year could be seen," explains the source.

According to the survey, pressures on input prices were once again pronounced in the Mozambican economy in June, although the inflation rate slowed slightly from the four-year high recorded in May.

Both purchase prices and wage costs, the survey said, continued to rise significantly, reflecting higher fuel prices and wage pressures.

In turn, companies have increased their production charges at a marked rate, due to efforts to pass on higher costs to customers.

The banking institution's survey also says that procurement activity reflected a modest increase in demand in June. "The acquisition of means of production showed a consolidated increase, but at the weakest pace recorded since March, leading to a significantly slower recovery in inventories," the document reads.