Business conditions in Mozambique have improved for the second month running, according to Standard Bank Mozambique's June PMI survey.

"Stronger customer demand supported a moderate increase in private sector activity, which was the fastest recorded since July 2023. Rising sales and production requirements encouraged companies to stockpile inputs, as suppliers' delivery times also improved," the Standard Bank document indicates.

The document also says that sales prices increased at the sharpest rate in ten months, despite the cooling of pressure on input prices.

Business activity in Mozambique expanded for the third consecutive month during June, as companies stepped up their operations due to a greater number of clients and stronger demand conditions.

The rate of growth in production was the fastest seen in 11 months, with all five sectors covered by the survey recording a recovery since May.

The growth in the flow of new orders also strengthened in June, with interviewees commenting on the arrival of new clients and increased requests for work.

Rising levels of demand precipitated another increase in stock levels in June. Purchasing stocks rose for the second month running, following a seven-month period of reduction. The expansion softened compared to May and was only slight, due in part to a weaker rise in purchasing activity.

On a positive note, companies continued to report faster deliveries of inputs. Average delivery times shortened to a greater extent than May's six-month low, amid reports of faster suppliers, greater availability of inputs and improved supply lines from abroad.

Despite a stronger increase in production, employment growth was rather subdued at the end of the second quarter. The latest data showed only a marginal increase in the overall number of employees. At the same time, companies noted an increase in their backlogs for the first time in four months, and the sharpest increase since April 2021.

On the price front, the June survey data pointed to some relief for Mozambican companies. General input costs rose at the slowest pace in the current five-month inflation series. This was due to a softer increase in purchasing costs, as well as a near stabilization in wages. That said, there were some reports of increases in the prices of materials, fuel costs and supplier charges.

In contrast, the average prices charged by Mozambican companies rose to the sharpest degree since August last year, although only at a modest rate overall. Companies reported efforts to increase margins and pass on cost increases to customers.

Production expectations, while remaining firmly positive, fell to their lowest level since February 2023 in June. Some 37% of the companies surveyed expect production to expand next year, with mentions of business development, sales growth, quality improvements and expansion into foreign markets.

(Standard Bank Moçambique)