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Output levels unchanged on average in the third quarter of
2021
COVID-19 wave forces renewed lockdown measures
Majority of countries continue to record rising employment
Outlook jumps to highest since start of pandemic as infections
fall
Sub-Saharan Africa saw economic activity stall during the third
quarter of 2021, as a wave of the COVID-19 Delta variant led to
heightened lockdown measures and a slowdown in demand. The region
also faced disruption to supply chains that not only curbed
production but also led to further marked rises in costs and output
charges. However, with tighter lockdown rules appearing successful
in reducing the spread of the virus, the loosening of measures led
to a modest recovery in demand towards the end of the quarter,
helping business confidence improve to the highest for 19 months in
September.
PMI survey data covers seven countries across Sub-Saharan Africa
that account for approximately 60% of GDP in the region. A
GDP-weighted average of these series has been calculated to provide
an overview of the economic trends up to the third quarter of
2021.
Lockdowns disrupt recovery across Sub-Saharan
region
On average in the third quarter of 2021, the IHS Markit
Sub-Saharan Africa PMI Output Index posted 50.0, indicating that
business activity levels were unchanged overall. This compared with
a reading of 53.0 in the second quarter, that was concurrent with
an estimated annual growth of 10.1%.
The slowdown signalled in the third quarter was largely due to a
renewed contraction in output during July; the first seen in
exactly a year. Since then, output has slowly recovered, with the
monthly index rising to a four-month high of 51.3 in September.
Large parts of the region suffered from a marked rise in
COVID-19 case numbers during the third quarter of the year, which
led several countries to impose tighter lockdown measures to curb
its spread. As a result, new business levels rose only modestly
over the quarter, with the weakest rise recorded in July.
Businesses in Sub-Saharan Africa also noted some difficulties
with processing new orders due to raw material shortages. Among the
items reported in short supply were metal components such as steel
and aluminium, timber, packaging and electrical items, all of which
have seen record global supply shortages during 2021.
Nigeria drives growth, but Uganda and South Africa see
marked declines
Only two of the seven monitored countries in the Sub-Saharan
region saw an expansion in output over the third quarter, down from
four in the second quarter. Nigeria drove most of the upturn as
demand for goods and services remained strong and all broad sectors
registered growth. Kenya meanwhile saw a slight rise in activity as
loosening curfew and lockdown measures led to a recovery in demand,
although rising living expenses offset part of this positive
impact.
At the other end of the scale, Uganda recorded the steepest
downturn of the monitored nations in the third quarter. The Ugandan
government imposed a 42-day lockdown that led to sharp declines in
business activity during July and August. Similarly, a wave of
COVID-19 cases led the South African government to tighten lockdown
measures in July, while businesses in some provinces were also
affected by civil unrest. This culminated in the worst quarterly
performance since the third quarter of 2020.
Zambia recorded a further decrease in output over the third
quarter, albeit one that was modest overall. More positively, there
were back-to-back expansions in new orders for the first time since
mid-2018, offering hope that activity will begin to expand
soon.
Mozambique and Ghana both registered fractional drops in output
that contrasted with modest expansions in the previous quarter.
Notably, Mozambique saw a tightening of lockdown rules that
constrained overall activity.
Rising new orders provide impetus for job
creation
Whilst output was unchanged in Sub-Saharan Africa during the
third quarter, there was a modest uptick in new orders, which bodes
well for the fourth quarter. This helped firms to continue adding
to their employment numbers, meaning that staffing levels have now
risen in each of the past six months, after falling in 13 of the
prior 14 months.
Moreover, five of the seven countries recorded an upturn in job
numbers during the third quarter. Correlating with the trend for
output, Nigeria saw the fastest increase in employment. Mozambique,
Kenya, Zambia and Ghana also recorded overall expansions.
The two countries that saw the greatest disruption from lockdown
measures in Q3, Uganda and South Africa, also saw a reduction in
staffing capacity. That said, job cuts in the latter nation were
only fractional.
Supply challenges lead to sharp price
inflation
As seen around the world, Sub-Saharan Africa faced strong
inflationary pressures in the third quarter of the year. The rate
of input price inflation eased from the second quarter but remained
one of the highest since this series began in 2014. Central to the
markup in prices were supply side challenges, as businesses
continued to face a lack of input availability that translated into
higher raw material costs. Rising fuel and transport prices were
also often mentioned by panellists.
Sub-Saharan businesses passed these costs onto their customers
during Q3. Notably, average prices charged rose at a quicker pace
than that of input costs, and by the widest margin seen in the
series history. Nigeria recorded the sharpest increase in output
charges, while Uganda was the only country to see an outright
decline over the third quarter.
Falling cases and easing restrictions lead to boost in
confidence in September
Most of the Sub-Saharan region saw COVID-19 cases fall in
September, supporting a roll-back of restrictive measures. As well
as helping activity to recover, confidence regarding future output
also strengthened in the latest survey period. In fact, business
optimism rose to the highest since February 2020, before the first
wave of COVID cases, though it remained slightly below the average
level seen before the pandemic.
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
