September private sector index rises two points with new orders

October 5, 2021 in Business by Editor

Construction was the only one of the five broad sectors covered to buck the wider trend and recorded a rise in workforce numbers.

he Ugandan private sector was able to build on the return to growth seen during August at the end of the third quarter, registering a second consecutive rise in output and new orders. However, employment and purchasing activity continued to fall during September.

During September the headline Stanbic PMI posted a reading of 52.5, up from 50.2 in August and above the 50.0 no-change mark for the second month running. This follows the easing of most Covid-19 lockdown restrictions at the end of July. The latest reading was also in line with the average since the survey began in June 2016.

The monthly survey from about 400 respondents covers the agriculture, industry, construction, wholesale & retail and services sectors. The headline figure derived from the survey is the Purchasing Managers’ Index (PMI) which provides an early indication of operating conditions in Uganda.

The Head of Trading, Global Markets at Stanbic Bank Uganda, Ronald Muyanja said, “New orders increased for the second consecutive month amid a loosening of lockdown restrictions feeding through to higher customer numbers and improving demand. In turn, business activity also expanded in September after having returned to growth in August. Four of the five broad sectors covered by the survey signaled increases in output, the exception being wholesale & retail.”

The PMI is a composite index, calculated as a weighted average of five individual sub-components, namely 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 a reading below 50.0 shows a deterioration.

According to the latest findings, despite increases in output and new orders, companies lowered their staffing levels for the fourth successive month and continued to reduce their purchasing activity and inventory holdings. Construction was the only one of the five broad sectors covered to buck the wider trend and recorded a rise in workforce numbers.

Overall input prices rose on the back of higher purchase costs and increased utility charges. Where purchase prices rose, panelists linked this to a range of items, most notably cement, food products and stationery. Wage costs continued to fall, however, in line with the trend in staffing levels.

Muyanja said, “September data pointed to a second successive monthly improvement in suppliers’ delivery times as prompt payments encouraged vendors to speed up deliveries. Shorter lead times were seen in the agriculture, construction and wholesale & retail sectors, while industry posted deterioration in vendor performance.”

The passing on of higher overall input costs to customers resulted in a first increase in selling prices since May. Companies were confident in further output growth over the coming year amid expectations of improvements in customer numbers and new order volumes. Some 89% of respondents predicted a rise in activity over the next 12 months, with just 4% pessimistic.

However, while total new business continued to recover following the loosening of lockdown restrictions, international demand struggled again at the end of the third quarter. New export orders decreased for the thirteenth consecutive month.

 

new ordersoptimisticUganda private sector Stanbic PMI