The global economic scene has taken a noticeably cautious turn as we step firmly within 2025, with January's Purchasing Managers’ Index (PMI) reports shedding light on both expected trends and immediate challenges. The global economic expansion is slowing at the start of 2025, as the J.P. Morgan Global PMI Composite Output Index, as compiled by S&P Global Market Intelligence, registered 51.8, down from 52.6 seen just the month prior. This dip marks the slowest growth phase recorded for the economy since January 2024 and highlights pressures on various sectors amid broader inflationary concerns.
One key feature of this latest PMI report is its indication of continuing growth across the global economy, albeit at diminished rates. While the services sector showed signs of slowing, manufacturing emerged on the path back to expansion after contracting late last year. Business sentiment among manufacturing executives also improved, yet it remains to be seen how upcoming U.S. tariffs, anticipated to disrupt several sectors, will play out.
Meanwhile, the economic climate is distinctly different within Mozambique, where the Standard Bank's PMI reveals continued deterioration. It fell to 47.5, indicating the economy's contraction for the third consecutive month, though it fared slightly improved from December's 52-month low of 46.4. Persistent political protests have continued to disrupt business operations, impacting everything from output levels to new order intakes.
According to Fáusio Mussá, Chief Economist at Standard Bank Mozambique, the month-to-month contractions highlight significant challenges yet offer glimmers of hope as some businesses begin to rebuild capacity. This renewed effort is echoed by growing employment figures, contrasting sharply against recent months of cutbacks. Mussá notes, “The PMI implies moderates price pressures... indicating inflation may remain contained.”
The report outlined the key reasons behind this contraction, emphasizing weak demand persisting primarily due to disruptions from public demonstrations alongside high inflation pressure. The significant drops observed were mirrored through deteriorated order books and reduced supplier delivery cycles, issues tied closely to the anxiety stemming from the political climate. A month-on-month recovery has appeared, particularly in staffing and input purchasing, translating to some positive developments within the otherwise bleak framework.
Despite its current challenges, the overall tone among private sector firms surveyed reflects cautious optimism. Some business operators shared ambitions for what they deem potential returns to normalcy, with forecasts for future activity being relatively brighter. Respondents to the PMI survey expressed hopes for product development and broader customer base increases, hinting at multifaceted growth strategies amid relentless pressures.
On the global front, the broader economic slowdown is associated with rising inflationary pressures as selling price inflation across goods and services reached impressive eight-month highs. Input costs are also rising, exacerbated by inflation across both manufacturing and service sectors. Analysts remain vigilant, particularly as sectors brace for impacts stemming from anticipated trade tariffs, potentially stirring volatility within the markets.
Both the Standard Bank and S&P Global analyses indicate macroeconomic movements occur against the backdrop of heightened uncertainty, with the back-and-forth dynamics of tariffs and inflation remaining central to the world's economic performance. Observers will closely monitor the next PMI contributions, scheduled for release on February 21, for fresh insights on business conditions subsequent to these pivotal developments.
Concurrently, Mozambique's GDP growth estimates were forecasted at 2.5% year-on-year for 2024, translating to contrasting figures as the year progresses, but the path forward appears to lean toward gradual recovery by 2025. Mussá reinforces expectations of GDP growth of around 3% year-on-year, as the nation navigates through its current economic trials. ”Inflation is expected to rise to 6.1% y/y by December 2025, from 4.2% y/y just this past December,” he concludes, tackling the twin issues of inflation and slowing growth head-on.
Global markets firmly hinge on comprehensive insights derived from the PMI compilations as businesses decipher volatility, and adjust appropriately for what lays down the road. The interaction between rising demand pressures and inflation remains particularly delicate as private sector businesses chart their next moves amid such unpredictability. It is becoming evident: the 2025 economic narrative will be one to watch closely.