Business activity and output recorded the highest expansion since February 2021 due to stronger customer demand, according to IHS Markit estimates.
As a result of more favourable operating conditions in April, the private sector recorded a purchasing manager’s index (PMI) of 52.4 above 51.8 in March. This reflects the highest PMI recorded PMI since February 2021.
“Stronger customer demand was also the main factor behind a further rise in output. Business activity increased at a solid pace, and one that was slightly quicker than seen in March.”
According to IHS Markit, consumers placed new orders in April amid stronger demand, good relationships with clients and customer recommendations. This trajectory continued each month since June 2020.
Furthermore, within this period, firms increased employment modestly, albeit, firms struggled with clearing off backlogs of workload due to difficulties encountered in securing materials.
“Higher output requirements and the filling of previously vacant positions contributed to a further increase in staffing levels… Efforts to keep on top of workloads by taking on extra staff were hampered by difficulties securing materials.”
Also, delays in suppliers’ delivery times in April was recurrent, due to wider shortages. The times between order of items and delivery lengthened for the fifteenth successive month, albeit marginally.
Aside these developments, the solid expansion in purchasing activity became buoyed by firms’ increased efforts to secure inputs. Since last November, stock of purchases have been rising, with the rate of accumulation the highest, this month.
Andrew Harker, Economics Director at IHS Markit commented:
“The private sector is enjoying a sustained period of growth at present, with continued improvements in customer demand helping to fuel increases in output, purchasing and employment.”
Factors increasing cost of purchases
Meanwhile, purchase costs also rose in April as problems surrounding ease of securing materials. Goods such as cement and maize were among items classified as bearing high costs. Freight charges also contributed to the high input costs. Staff costs also increased but at a rate much slower than the purchase price.
“Data actually suggested that output growth could have been even quicker, were it not for material shortages which prevented work on some projects and led to a record rise in outstanding business.”
Andrew Harker, Economics Director, IHS Markit
Overall input cost inflation remained elevated, thus leading companies to raise their selling prices. The momentum of inflation extended to a year, with the latest increase the fastest in three months.
This notwithstanding, the overall business environment is likely to continue shaping up on the back of further improvements in the public health situation in the country. Also, improvements in business conditions spiralled ongoing confidence in the outlook of output in the coming year.
Considering the above, ongoing assessment of the business environment show that concerns about the impacts of the COVID-19 pandemic and price increases are prominent factors affecting output.
“Overall, after GDP returned to growth in the final quarter of 2020, we can expect to see a further quarterly rise in Q1 2021, and moving into Q2 should the PMI data remain around present levels. This is all, of course, based on the proviso that there isn’t a further spike.”
Andrew Harker, Economics Director, IHS Markit
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