Private sector recovery continues despite November dip in PMI

December 7, 2020 in Business, Companies, Markets by Editor

Agriculture, industry, services and wholesale & retail sectors all recorded higher activity but construction saw no new orders in during November.

Four of the five monitored sectors in the monthly Stanbic Purchasing Managers’ Index (PMI) reported increases in output with the exception of construction as the November reading dipped to 53.9 down from 55.8 in October.

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration. Agriculture, industry, services and wholesale & retail sectors all recorded higher activity but construction saw no new orders in during November.

This is the fifth consecutive month that headline PMI posted above the 50.0 no-change mark signaling an overall improvement in business conditions. However, export orders ticked down midway through the final quarter of the year. New business from abroad has now decreased in three successive months.

Commenting on the latest survey findings, Ferishka Bharuth, Economist – Africa Regions at Stanbic Bank said “November’s PMI survey confirms that private sector economic activity is normalizing. While the upcoming election in January appears to support output, new export orders are declining. It is likely that risks related to a second wave of Covid-19 infections globally will continue weighing on new export orders. Moreover, the private sector continued to increase employment, which should bode well for the recovery in GDP growth.”

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%).

Sponsored by Stanbic Bank and produced by IHS Markit, the monthly survey has been conducted since June 2016. It covers agriculture, industry, construction, wholesale & retail and service sectors involving some 400 respondents. The PMI report contains the latest analysis of data collected on business conditions from the Ugandan private sector.

November data signaled a further expansion, with output rising for the fifth month running. Ongoing new order growth supported job creation and higher purchasing. There is also confidence that new orders would continue to rise, supported by the optimism in the 12-month outlook for output.

Following the easing of coronavirus disease 2019 (Covid-19) restrictions, output increased again as workloads continued to trend upwards. New orders grew amid a return to more normal operating conditions. Despite this, firms were again able to keep on top of workloads, as evidenced by a fall in outstanding business.

Rising new orders led to increases in both employment and purchasing activity in November. The expansion of input buying fed through to higher inventories, while suppliers worked to improve delivery times in order to keep hold of business.

However, increases were reported in prices for raw materials such as cement, food products and metal bars were reported midway through the final quarter. There were also higher transportation and staff costs, leading to a rise in overall input prices.

In turn, companies raised their own selling prices for the fifth month running. Firms remained confident that business activity would increase over the coming year. Sentiment was centred on expectations that new order volumes would continue to improve.