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Companies remain optimistic about future output growth
Kampala, Uganda | JULIUS BUSINGE | The monthly Stanbic Purchasing Managers’ Index (PMI) for Uganda dipped slightly in August, falling from 53.9 in July to 51.6, as businesses grappled with the implications of the World Bank’s suspension of further loans to the country.
However, optimism remains intact, driven by a consistent trend of new orders, according to a statement by the lender on September 7.
Despite the drop in the PMI, August marked the thirteenth consecutive month of expansion in output. Respondents to the survey attributed this increase to improved demand.
Christopher Legilisho, an Economist at Stanbic Bank, said, “Uganda’s private sector posted a strong performance in August, shrugging off foreign exchange market volatility after the World Bank suspended project support.”
While certain sectors such as construction and services experienced growth, others, including agriculture, industry wholesale, and retail, saw a decrease in activity due to financial pressures in the economy.
The Stanbic PMI is compiled by S&P Global through questionnaires sent to purchasing managers in approximately 400 private sector companies. It covers various sectors, including agriculture, mining, manufacturing, construction, wholesale, retail, and services. The PMI is calculated based on five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%), and Stocks of Purchases (10%). A reading above 50.0 indicates an improvement in business conditions, while a reading below 50.0 signals deterioration.
New orders in the third quarter continued to rise, with respondents attributing this increase to securing new customers. Companies are optimistic about future business prospects and plan to increase employment, inventories, and purchasing activity in response to growing orders. However, there was a noticeable decline in export orders.
Meanwhile, August data showed an increase in input costs for the Ugandan private sector, driven by higher charges for electricity and water. All monitored sectors experienced rising input costs, which led to firms raising their selling prices. Some companies, however, offered discounts to stimulate demand amidst mounting financial pressures.
In August, companies increased their inventories of inputs, marking the tenth consecutive month of growth. While workforce numbers expanded in various sectors, backlogs of work decreased for the first time since February across all sectors covered by the survey.
Looking ahead, companies remain optimistic about future output growth, with 88% of respondents forecasting expansion. They anticipate increased customer numbers and improved demand to support this growth.
