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The latest Stanbic Bank Purchasing Managers’ Index (PMI) for September revealed positive business conditions despite a slight dip in the headline index to 54.2 from 56.3 in August. A reading above 50.0 indicates business expansion, and September’s performance underscores continued growth in Uganda’s private sector.
A significant factor in maintaining business output was increased advertising, which strengthened demand and attracted new clients.
Christopher Legilisho, economist at Stanbic Bank, attributed this growth to robust client demand. “Strong business output and new order growth were linked to effective advertising,” he explained. “Firms foresee healthy demand conditions over the coming year, with plans to increase investment in advertising and new products.”
The PMI, compiled by S&P Global, gathers data from around 400 purchasing managers across key sectors such as agriculture, manufacturing, construction, and services. It reflects trends in new orders, output, employment, supplier delivery times, and purchase stocks.
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%).
According to the latest survey, the Ugandan private sector remained in growth territory during September. The continued improvement in business conditions was driven by expansions in output, new orders, and employment. Demand strength also supported positive output expectations for the year ahead, as firms foresee increased business activity.
Parallel to shorter lead times on inputs, companies continued to raise their purchasing activity amid greater new orders. In turn, firms sought to build inventories further to support future output.
Ugandan businesses are now stepping up their input buying again in a bid to boost inventories further. The rise in purchasing activity came amid another improvement in vendor performance.
Meanwhile, despite broadly unchanged staff costs, higher purchase prices pushed total operating expenses up. In line with higher overall input prices, companies signalled a renewed rise in output charges.
Legilisho said, “Both input and purchase prices increased relative to August, reflecting higher prices for raw materials as well as higher utility bills. Wage prices broadly stagnated in September as businesses increased output prices, thereby passing the higher costs on to consumers. Positively, this did not translate into high inflation during the month as the rate of inflation declined to 3% year-on-year (y/y) in September from 3.5% in August.”
Although growth in output was broad-based by sector, construction firms noted a renewed decline in new orders during September.
Overall input costs continued to increase in September, as has been the case in each month since August 2021. Panellists commonly stated that higher utility bills (including water and electricity) and supplier prices were driving factors behind inflation.
Whilst staff costs broadly stagnated on the month, purchase prices rose further and pushed up total input costs.
Amid accommodative demand conditions, firms sought to pass through higher costs to customers. Selling prices increased in September, following a brief decline in August.
In line with greater new orders, Ugandan companies expanded their workforce numbers in September. The current sequence of job creation was extended to a year and a-half.
Sufficient capacity enabled firms to resume the depletion of backlogs of work, following a rise in August. Supporting the rise in employment was further business confidence in the year-ahead outlook for output. Optimism reportedly stemmed from planned investment in new products and more planned advertising.