Uganda’s business outlook remains buoyant in October

November 5, 2019 in Business, Companies, Markets by Editor

Further improvements in demand are expected over the coming year, contributing to confidence among companies regarding the 12-month outlook for business activity.

The Stanbic Purchase Managers Index (PMI) for October indicates a sustained improvement in the business environment.

Sponsored by Stanbic Bank Uganda and produced by IHS Markit, the latest survey results indicate a PMI of 56.3 for October, up slightly from the 55.7 seen in September. However the monthly figure remains well above the threshold 50.0 that denotes a positive outlook.

Ugandan companies continued to secure greater volumes of new business in October leading to increased production and demand for more workers.

The survey has been conducted since June 2016 and covers the agriculture, industry, construction, wholesale & retail and service sectors. The headline figure derived from the survey is the PMI index which provides an early indication of operating conditions in Uganda.

Benoni Okwenje, Stanbic Bank Uganda’s fixed income manager, said the findings show new orders expanded for the thirty-third month running, with panelists linking the rise to increased customer numbers, marketing and competitive pricing.

“Companies responded to higher new orders by increasing their business activity, aided by a further expansion in staffing levels. The rise in employment helped firms keep on top of workloads, with backlogs of work declining again,” he said.

The report which contains the latest analysis of data collected from the monthly survey of business conditions in Uganda’s private sector, shows that purchasing activity increased for the twentieth successive month to October. Growth of both output and new orders was recorded across each of the five broad sectors covered by the survey.

Meanwhile, input costs rose again last month, leading to the ongoing output price inflation. Input costs increased in October, amid rises in purchase prices, staff costs and utility rates. According to respondents, inflation of purchase costs reflected higher prices for items including foodstuffs, cement, fuel and iron bars.

Okwenje said with input costs rising, companies in Uganda increased their output prices accordingly. Some panelists reported that the improving customer demand enabled them to raise their selling prices. Charge inflation was recorded in all monitored sectors, except for agriculture which saw no change in output prices.

According to the survey, further improvements in demand are expected over the coming year, contributing to confidence among companies regarding the 12-month outlook for business activity.

Jibran Qureishi, Regional Economist East Africa, Global Markets at Stanbic Bank said, “The short rains seem to have started early this season which should thus bode well for agricultural productivity in the first half of 2020.In fact, we still expect the government continue investing in oil related infrastructure which will probably continue to anchor GDP growth to remain more or less around the 5.8%-6.0% level over the coming year.”

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.