A return to normality in the Ugandan economy helped lead to a further improvement in business conditions in the private sector during February, according to the Stanbic Bank sponsored Purchase Managers Index produced by IHS Markit.
According to the index, output, new orders, employment and purchasing activity were all up and companies were optimistic for the coming year. That said, inflationary pressures remained evident.
The headline PMI rose to 55.7 in February, up from 54.9 in January and comfortably above the series average. The health of the private sector has now improved in each of the past seven months, according to the index.
Ferishka Bharuth, Economist – Africa Regions at Stanbic Bank said, “within the index output, new orders, employment and purchasing activity were all higher and companies were optimistic for the coming year. Inflationary pressures are evident, output charges increasing for the sixth consecutive month, as companies pass on higher input prices to consumers.”
Ronald Muyanja, the Head of Trading at Stanbic Bank Uganda said a more open economy after the easing of COVID-19 restrictions meant that firms were able to secure greater volumes of new orders and expand their business activity during February.
“In both cases, increases were seen in four of the five monitored sectors, the exception being construction,” Muyanja said.
He said companies responded to greater workloads by expanding both their staffing levels and purchasing activity, with the latter also feeding through to higher inventories as shorter delivery times helped firms to secure inputs.
A third rise in employment in the past four months added to staff costs midway through the first quarter. Meanwhile, higher purchase prices were also signaled, with a range of products reportedly up in price, most notably cement, food products, fuel, soap and stationery.
Alongside increases in staff and purchase costs, the index suggests higher prices related to electricity and transportation added to overall input costs which rose for the seventh month running. The passing on of higher input prices meant that output charges increased for the sixth successive month.
Going forward, there is widespread optimism that output will increase over the coming year, largely reflecting confidence in the future path of new orders. More than 86% of respondents predicted a rise in activity. This survey has been conducted since June 2016 and covers the agriculture, industrial, construction, wholesale & retail and service sectors.
The headline figure derived from the survey is the Purchasing Managers’ Index (PMITM) that provides an early indication of operating conditions in Uganda. It is a composite index, calculated as a weighted average of five individual sub-components: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.