Ugandan private sector continues to grow amid upturn in output in August

Ugandan companies registered a further expansion in business activity midway through the third quarter, extending the current sequence of growth to seven months as the headline Stanbic Bank Purchasing Managers’ Index (PMI) remained above the positive threshold mark of 50.0.

At 53.3 during August, the Stanbic Bank PMI was down slightly from 53.6 in July, but maintained a trend of improving private sector conditions on a monthly basis since February.

Christopher Legilisho, Economist at Stanbic Bank said, “The Stanbic Bank Uganda PMI showed ongoing strong economic conditions in the private sector in August. Sustained new order and output growth imply business conditions were supportive across all sectors. Furthermore, quantities of inputs purchased increased, and inventories grew. Meanwhile, companies were still optimistic about future output.”

He said, “Employment conditions were robust in August, except for manufacturing where staffing numbers were unchanged on the month. Inflationary pressures remained amid increases in total input prices, purchase costs and staff costs, with August headline CPI unchanged from July.”

The Stanbic Bank PMI is compiled by S&P Global on behalf of Stanbic Bank Uganda, 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%).

During August, the Stanbic Bank PMI panelists said the upturn was due to stronger demand conditions and another round of new order growth.

It was supported by increases in output, new orders, employment and inventories. Upbeat projections for business activity over the coming year also underpinned growth in input buying.

Meanwhile, job creation and greater capacity enabled firms to stay on top of their backlogs of work. At the same time, further increases in purchase and staff costs pushed overall input prices up.  Favourable demand conditions allowed firms to pass on higher costs to customers via another rise in selling prices.

New sales also rose for a seventh month running in August. The increase was attributed by firms to successful advertising and marketing campaigns.  At the sector level, expansions in both output and new orders were recorded in all segments.

Companies also supported the processing of new orders through greater input buying and efforts to build safety stocks. As a result, backlogs of work were depleted for the seventh time in the last eight months and vendor performance was broadly unchanged on the month.

Although decreases in total input prices were recorded in the agriculture and construction sectors, the rise in output charges was broad-based by segment.

Meanwhile, output expectations at Ugandan companies remained positive in August, as firms foresee a rise in business activity in the coming year. Confidence was reportedly buoyed by planned investment in advertising and client outreach.