Ugandan firms hire new workers to cater for higher July demand

August 5, 2024 in Business, Companies by Editor

Driving the increase in staff costs was the recruitment of additional, temporary workers to support the processing of incoming new orders in July. Employment rose for the sixteenth month running, with backlogs of work falling in each month in 2024 so far as firms noted sufficient capacity to process incomplete business.

The headline Stanbic Purchasing Managers’ Index (PMI), which tracks Uganda’s private sector operating conditions, rebounded to 53.7 during July from the dip of 51.9 posted for June after a high of 54.1 recorded in May. Readings above the threshold 50.0 mean a generally positive outlook.

Christopher Legilisho, Economist at Stanbic Bank said, “The July PMI revealed a robust private sector economy performance. For the fourth month now, surveyed firms have indicated strong output and new orders, linked to strong client demand conditions across all economic sectors in July, with firms upbeat about client demand conditions persisting over the next 12 months. Firms have therefore increased employment, input buying and stocks of raw materials to support increased workloads from higher output and new customer orders.”

According to the latest survey, optimism in the outlook for output over the coming year was also recorded, as firms raised their workforce numbers again in line with upbeat growth forecasts and greater new sales. At the same time, input buying increased amid efforts to stockpile materials. Shorter lead times for inputs aided such efforts. However overall input prices rose again following hikes in both staff and purchase costs. Selling prices were also raised further.

The Stanbic PMI is compiled by S&P Global from responses to monthly questionnaires sent to purchasing managers. The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services.

The PMI is a weighted average of the following five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%).

Legilisho said, “Notably, total input prices, purchase prices and output prices increased in July, driven by wage bill pressures as well as the higher cost of raw materials, utilities and rental prices. Only the agricultural sector reported a drop in overall prices across the board, while the industrial sector reported a fall in staff costs. The official July inflation outcome of 4% y/y, after 3.9% y/y in June, implies only a slight increase in inflationary pressures being passed on to consumers.”

Contributing to the overall upturn was another monthly increase in output at Ugandan businesses in July. Greater business activity was supported by a rise in new orders and greater client demand. Of the five monitored sectors, growth in output was broad-based.

Similarly, new orders grew for the fourth month running at the start of the third quarter. The upturn was widespread across all five monitored sectors, with firms linking the expansion to new client wins.

July data, meanwhile, saw a further intensification of cost pressures, as input prices rose again. Both purchase and staff costs increased, with firms highlighting greater foodstuff, utility, rent and timber prices, alongside an uptick in wage bills. That said, at the sector level, only construction and services saw a rise in purchase costs. Concurrently, industry was the only sector to record a decrease in wage bills.

Firms were confident of a rise in output over the coming year during July, as hopes of a continued favourable sales environment supported optimism. Companies across the five monitored sectors expressed positive sentiment in regards to their expectations (on average).

Despite higher purchase costs, firms raised their input buying in July, as pre- production inventories also grew amid efforts to stockpile materials. An eighth successive monthly improvement in suppliers’ delivery times aided firms’ efforts to build safety stocks.