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The latest Stanbic Bank Purchasing Managers’ Index (PMI) covering business activity for the month of June has shed light on Uganda’s private sector showing an expansion midway through the year, as business conditions improve further on the back of increased client numbers and favourable demand trends.
This has also reportedly led to the latest rise in new orders and greater business activity in three major sectors including wholesale and retail, manufacturing, and construction. However, agriculture and services companies registered a drop in business activity.
The Stanbic PMI findings show that the uptick in new orders in June encouraged firms to hire additional staff in June, as employment continued to grow. Ugandan companies reportedly recruited permanent and temporary staff in order to build capacity.
Christopher Legilisho, an Economist at Stanbic Bank said, the month of June produced a third successive month of strong private sector activity growth in Uganda with output and new orders increasing from healthy consumer demand, referrals, and newly acquired clients.
“Ugandan firms increased staffing levels for a fifteenth month now, including both part-time and full-time workers due to strong output. Consequently, staffing costs ticked up due to expanding workforces,” Legilisho said.
Ugandan companies highlighted that greater wage bills were linked to job creation, and high purchase prices were linked to hikes in utility, rent and material costs which also drove the rise in purchase prices, with firms passing on the greater costs to consumers.
Despite increased cost burdens, Ugandan firms stepped up input buying in June. Competition among suppliers also drove a further improvement in delivery times, as firms engaged in stock building efforts amid hopes of further growth in client demand.
“Inflationary pressures persisted during the month as firms increased output prices due to solid demand conditions, with input prices and purchase prices rising as operating expenses increased, with costs connected to raw materials, land and utilities remaining high. Nonetheless, firms remain optimistic in the outlook for customer demand and output over the next 12 months,” Legilisho explained.
Survey methodology
The Stanbic Bank Uganda PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 private sector companies. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP.
The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
The headline PMI posted at 51.9 in June, to signal another monthly improvement in the health of the Ugandan private sector.
Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month. The headline figure is the Purchasing Managers’ Index™ (PMI).
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%). For the PMI calculation the Suppliers’ Delivery Times series is inverted so that it moves in a comparable direction to the other series.