Private sector mood remains upbeat during November

The mood in Uganda’s private sector remains upbeat with the monthly Stanbic Purchasing Managers’ Index (PMI) jumping to 55.7 during November from the 52.9 recorded in October. Readings above 50.0 mean a positive outlook.

Christopher Legilisho, Economist at Stanbic Bank said, “The Stanbic Bank Uganda PMI data for November revealed a vibrant private sector growing in optimism about both current and future economic conditions. The PMI rose to 55.7 which is an extension in business conditions for an eighth consecutive month due to strong, sustained customer demand resulting in an expansion in output and new orders despite a dip in employment.”

He said the uptick in new orders growth was broad-based, reflecting the acquisition of new clients and an improvement in consumer purchasing power. Firms ramped up purchasing activity and inventories to accommodate strong demand.

The Stanbic 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%). The sectors covered by the survey compiled by S&P Global, include agriculture, mining, manufacturing, construction, wholesale, retail and services.

At the sector level, expansions in business activity and new orders were recorded across all five monitored segments.

Greater output and new orders supported overall growth, with demand conditions reportedly strengthening. In response to increased new business, and hopes of future expansions in client demand, firms stepped up their input buying. Despite a rise in new sales, companies were able to deplete backlogs of work further, leading to the first cut in staffing numbers since March 2023.

Meanwhile, total operating expenses increased again amid hikes in purchase and staff costs. At the same time, businesses were able to raise selling prices for the third month.

Legilisho said, “Employment levels fell in November across all surveyed sectors, implying firms targeted cost containment amid reduced work backlogs. Input and output price pressures increased due to high utility and energy bills. Further, purchase prices increased due to higher costs for construction materials, food, and toiletries.”

He said, “Notwithstanding the dip in employment, firms remain positive about the economic outlook due to planned investment as well as expectations of strong consumer demand conditions over the coming year.”

On the price front, total input costs rose further, as both purchase and staff costs increased again. Higher utility and material prices were commonly highlighted as the driving factors behind overall cost inflation.

In line with greater cost burdens, Ugandan businesses raised their selling prices for the third month running in November.  Although all monitored sectors registered higher overall input costs, only construction companies did not raise.

Finally, input buying grew again midway through the fourth quarter. Increased purchasing activity was facilitated by another improvement in suppliers’ delivery times. Consequently, Ugandan companies were able to build desired safety stocks amid hopes of further upturns in new orders in the coming months.