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Firms Increase Temporary Hires amid Business Activity Growth

Hopes that customer numbers will continue to rise and that existing clients will commit to new projects supported optimism in the 12-month outlook for business activity.
posted onDecember 7, 2023

The monthly headline Stanbic Purchasing Managers Index (PMI) rose from 52.4 recorded in October to 53.4 during November, reflecting a continuing trend of sustained growth in private-sector activity, with both output and new orders rising for a sixteenth consecutive month due to solid consumer demand.

Commenting on the latest findings, Christopher Legilisho, Economist at Stanbic Bank said, “Hiring increased for an eighth month running, with firms having hired more staff on temporary bases to handle increasing orders and purchasing activity as well as to address backlogs. Of the surveyed sectors, all but agriculture caught up on work outstanding.”

The Stanbic PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers. The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services.

Legilisho said, "Business confidence is buoyant across the sectors on the outlook for customer demand and output over the next 12 months. Indeed, Ugandan firms increased quantities purchased to match robust customer demand. However, suppliers’ delivery times remain a sticky issue because of poor weather conditions and delayed payments.”

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%). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration. The latest reading was also above the seven-and-a-half-year series average of 52.6. The improving demand conditions helped lead to greater customer numbers.

Firms generally expect these trends to continue over the coming year. Hopes that customer numbers will continue to rise and that existing clients will commit to new projects supported optimism in the 12-month outlook for business activity. Around 82% of the regular 400 survey respondents were confident that output will increase, compared with less than 1% that were pessimistic.

Four of the five broad categories covered by the survey saw output increase, the exception being wholesale & retail. Respondents indicated that new customers had been secured, thereby resulting in an influx of new business. All five broad sectors saw new orders expand. Companies increased their purchasing activity in response to improving customer demand.

Despite this, a reduction in stocks of purchases was recorded, thereby ending a one-year sequence of accumulation. Those firms that purchased inputs during the month were faced with lengthening delivery times from suppliers. Lead times worsened for the fourth month running due to delayed payments and poor weather conditions. However, input costs rose again, in part due to higher fuel costs. Overall input prices increased midway through the final quarter of the year.

As well as higher purchase prices and staff costs, respondents also signaled rises in prices for utilities such as electricity. Agriculture was the only sector to record a fall in overall input costs. In turn, companies increased their selling prices. Output prices increased in the industry, services and wholesale and retail sectors, but decreased in agriculture and construction. According to the report, as has been the case in each month since April, employment increased during November.

Respondents linked higher staffing levels to rising workloads, but new workers were often hired on a temporary basis. Overall job creation was centred on the construction sector, with reductions signaled elsewhere. Sustained increases in workforce numbers meant that companies were able to reduce outstanding business again in November.

Backlogs of work have fallen throughout the seven-and-a-half years of data collection so far. Agriculture bucked the wider trend and posted an increase in outstanding work.

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