June 07, 2018 – Business growth improved further in May with the Stanbic Bank Uganda Purchasing Managers Index (PMI) for the month climbing to a record 53.9.
Generally seen as barometer of the mood and state of health of the private sector, the PMI recorded increases in output, orders and hiring.
All the key indicators continued to rise mid-quarter, underpinned by stronger demand.
“Business activity continued to improve in May. This trend is consistent with improving domestic demand and very impressive quarterly GDP numbers that were recently published. Of course, all eyes will now be on the FY2018/19 budget that will be read later this month. The market will be keen to assess whether the government will be factoring in any oil sector developments in revenue or expenditure plans while the private sector will also be interested to see if the government comes up with a business friendly budget which will encourage new investments,” said Jibran Qureishi, Regional Economist E.A at Stanbic Bank in comments on the survey findings.
The Parliament of Uganda recently approved a spending plan worth UGX 32.4 trillion for fiscal 2018/2019 with recurrent expenditure at UGX 9.4 trillion, development expenditure at UGX 13 trillion and statutory expenditure at UGX 10 trillion.
Analysing the May PMI figures, Mr Benoni Okwenge, the manager for Fixed Income at Stanbic observed that “businesses reported an increase in their average selling prices during May. Output prices rose across construction, wholesale and retail sectors but fell in agriculture and industry while the services sector remained unchanged.”
Price pressures meanwhile continued to build as rising fuel bills drove overall cost burdens higher.
“The price pressures were mainly caused by the weakening of the Uganda shilling which came under pressure due to strengthening of the dollar, increased demand for imports and dividend pay-outs,” he said.
The Stanbic PMI is a composite index, calculated as a weighted average of five individual sub-components: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.