Private sector register better performance at year end

Kampala, Uganda | THE INDEPENDENT | The year 2023 ended on a higher note for the private sector as companies registered more demand for their goods and services in the month of December.

This according to both the Uganda Bureau of Statistics and the Stanbic Purchasing Managers Index (PMI), which compile monthly inflation and business performance indicators respectively.

Greater customer numbers during December fed through to higher new orders and business activity as the headline monthly PMI rose to 54.8 from 53.4 in November.

This was the highest reading since June 2023 and above the 50.0 no-change mark for the fourteenth consecutive month.

A reading above 50.0 indicates positive and improving investor perspective of business performance, as anything below that is an underperformance.

The PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers leading sectors like agriculture, mining, manufacturing, construction, wholesale, retail and services.

According to UBOS December consumer price index, major price increases were mainly registered fuel, rice, motorcycles and transport, compared to the increases in November.

This is mainly because business realized higher demand for their goods and services in December, a trend also reflected in the Stanbic PMI regarding private sector activity.

“Uganda recorded solid PMIs for December, a continuing trend of robust growth in private-sector activity, with both output and new orders rising for a seventeenth consecutive month due to greater customer demand,” says Christopher Legilisho, Economist at Stanbic Bank.

The higher demand called for increased hiring for the ninth month in a row, with firms employing staff on both a permanent and temporary basis to handle the increasing orders and purchasing activity.

More staff were also needed to address backlogs concentrated in the agriculture sector, but the survey shows some reduction in employment in industry, though on the whole, companies expanded employment and purchasing activity.

“However, this capacity enhancement was not sufficient to prevent a first increase in backlogs of work on record. Meanwhile, input costs and selling prices continued to rise,” says Legilisho.

For the first time in three months, all five broad sectors posted an increase in output as the wholesale and retail category returned to growth.

“Firms are optimistic on the outlook for customer demand and output over the next 12 months. Indeed, Ugandan firms increased inventories and quantities purchased in line with robust customer demand,” Legilisho said.

Despite the expansions in employment and purchasing activity, companies recorded a rise in backlogs of work in December, the first time this has been the case since the survey began.

Overall input prices rose amid higher costs for purchases and staff alongside increased bills for electricity and water, while there were consumer price rises particularly in cement, fuel and sugar in December.

Companies remained optimistic in the 12-month outlook for business activity, with confidence fueled by expectations that customer numbers will rise further over the course of 2024.

Close to 83 percent of respondents predicted an expansion in output, with less than 1% of firms pessimistic.

Confidence in the outlook reflected predictions of further improvements in customer numbers. Positive sentiment was signaled across all five monitored sectors.

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URN