Business better in May, say experts

Kampala, Uganda | THE INDEPENDENT | Uganda’s private sector has recorded improvement in the business operations and performance over the month of May compared to the situation in April, according to an expert study.

The higher rate of activity by companies was mainly driven by the continued recovery of consumer demand, with most companies reporting getting new customers, according to the Stanbic Purchasing Managers Index done by S&P Global.

The index for May rose to  54.1, showing a continued positive and improving performance for the second consecutive month, as it was above the 50.0 point mark.

Christopher Legilisho, economist at Stanbic Bank said, “May produced a second successive month of buoyant private sector activity in Uganda. Output and new orders gained from robust consumer demand, referrals, and newly acquired clients”.

Growth was recorded in all sectors except for agriculture, with forms reporting increased staffing levels for a fourteenth month now, including both part-time and full-time workers due to increased output.

This also led to increase in staffing costs, which was also partly attributed to some companies paying bonuses to motivate workers.

The monthly Stanbic PMI is compiled from responses to questionnaires sent to about 400 managers responsible for purchases.

The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services.

In compiling the index, New Orders account for 30 percent while Output and Employment contribute 25 and 20 percent respectively. Suppliers’ Delivery Times weigh 15 percent and Stocks of Purchases 10 percent.

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

According to S&P Global, favourable demand conditions during May also underpinned optimism in the output outlook for the year ahead, with companies encouraged to expand staffing numbers again.

Shorter lead times and greater new orders allowed firms to increase their input buying and build stocks of purchases.

On the price front, greater purchase and staff costs were recorded, pushing total operating expenses up. In turn, firms raised their selling prices further.

“Further, greater employment allowed firms to handle outstanding work, thereby further clearing backlogs during May. Purchasing activity expanded, with inventories growing in May due to higher input buying and faster delivery times by firms,” said Legilisho.

The companies were also able to increase output prices due to higher demand for their products, while input and purchase costs also rose generally, especially raw materials and utilities.

“This implies increasing inflationary pressures. Still, firms remain upbeat on the outlook for customer demand and output over the next 12 months,” he said.

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