Uganda businesses record new orders in April

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Okwenje said businesses responded to increased orders with new hiring of staff and inputs for production.

May 7, 2018—Business conditions in the Ugandan private sector continued to improve during April, according to the latest Purchasing Managers Index (PMI) data from Stanbic Bank and IHS Markit. The PMI for last month was 51.8 compared to 53.2 in March 2018.

However, underpinning overall growth were further increases in output and new orders, which subsequently led to an expansion in workforce numbers.

Phumelele Mbiyo, a Regional Economist East Africa at Stanbic Bank and based in Nairobi said, “Uganda recorded the 15th consecutive month of expansion in economic activity in April, albeit moderating somewhat relative to March.

He said, “Despite this, it is evident that the expansion is not uniform across the economy. The agriculture and construction sectors experienced an expansion in both output and new orders while business activity contracted in the industrial, services and wholesale/retail sectors. This non-uniform nature of the economic expansion could be a reason for the absence of consumer inflation pressures.”

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%). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

At 51.8, the latest headline figure signaled a further improvement in the health of the Ugandan private sector. Using responses from some 400 private sector companies, the PMI data shows purchasing activity rose for the second month in succession in the private sector. But inflationary pressures persisted as rising cost burdens fueled output price inflation. The pace of growth also fell below the average observed across the series so far (since June 2016).

Stanbic Bank’s Fixed Income Manager Benoni Okwenje said, “Staffing levels increased boosted by heightened client demand and planned business expansions. Employment rose across three out of the five sub-sectors, the exceptions being industry and wholesale/retail where respective stagnation and contraction were seen. Businesses further responded to higher demand by expanding their purchasing activity for the second consecutive month. Meanwhile, competition among suppliers led average lead times for inputs to shorten further during April.”

April saw business activity increase for the fifteenth month in succession, amid strong underlying demand. Furthermore, Ugandan private sector firms experienced a rise in new orders at the start of the second quarter. The agriculture and construction sub-sectors led the expansion in both output and new orders, with business activity contracting across the industry, services and wholesale/retail categories.

Elsewhere, higher raw material prices underpinned an increase in cost burdens in April. In fact, overall input costs rose across all five monitored sub-sectors, continuing the trend observed since the survey’s inception. Accordingly, businesses across all five monitored sub-sectors increased their average selling prices at the start of the second quarter.

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