Companies raise prices amid higher demand during September

October 3, 2019 in Business, Companies, Markets by Editor

In spite of higher input costs, the rise in new orders has supported overall output and boosted Uganda’s private sector confidence.

October 3—Business conditions in Uganda remained good during the past 30 days despite the latest monthly Stanbic Purchase Managers Index (PMI) dropping from 57.5 in August to 55.7 in September.

Benoni Okwenje, the Stanbic Bank Fixed Income Manager said, “Private sector activity remains solid at the end of the third quarter of 2019. Despite the PMI declining to 55.7 in September from 57.5 in August, overall activity remains robust. Domestic demand continues to improve, partially driven by private sector credit growth over the last year. Despite higher input costs, the rise in new orders has supported overall output.”

Sponsored by Stanbic Bank and carried out by IHS Markit, the September survey indicated firms were securing additional customers, resulting in higher numbers of new orders and a subsequent expansion of business activity. However those interviewed said both input costs and output prices continue to rise.  The threshold for a positive outlook is 50.0 and the survey which has been conducted since June 2016

Okwenje said, “It has now been 32 months in a row of improving business conditions and we suspect this trend will carry through for the rest of the year.”

Stanbic Bank Uganda is a member of the Standard Bank Group, Africa’s largest bank by assets. Standard Bank Group reported total assets of R2.1 trillion ($148 billion) as at 31 December 2018, while its market capitalization was at R289 billion ($20 billion).

The 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%).

Results are derived from an analysis of data collected from the monthly survey of business conditions as seen by about 400 respondents. According to the September findings, the expansion in demand, alongside successful marketing in all the five broad sectors, saw a growth of output.

It states, ‘Purchasing activity continued to rise, extending the current sequence of expansion to 19 months. Faster suppliers’ delivery times meant that the increase in input buying fed through to an accumulation of inventories. Overall input prices increased, with panelists reporting higher costs for electricity and purchased items including cement, food products and stationery’.

In response to higher input costs companies raised their output prices. Selling prices have increased throughout the 40-month survey so far. The PMI report further states that the likelihood of continued new order growth and business expansion plans led to optimism among firms that output will rise over the coming year. Over 74 pc of panelists were confident regarding the outlook for the near future.