By Our Reporter,
BUSINESS
Key findings
- New orders up for eighteenth month running
- Staff hired to help clear backlogs
- Purchase prices rise but staff costs fall
January purchase prices increased on the back of higher costs for construction materials and food products, but staff costs decreased for the first time in almost 17 months as the headline Stanbic Purchasing Managers’ Index (PMI) slipped to 54.0 in January from 54.8 in December.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.
Christopher Legilisho, Economist at Stanbic Bank said, “Uganda in January continued its streak of strong PMI outcomes, now a 15-month trend of growth in private-sector activity. Output and new orders have increased over the last 18 months due to increased customer numbers, with growth recorded in agriculture, construction, industry, services and the wholesale and retail categories. Ugandan firms increased hiring for a tenth month running, albeit marginally, with firms also employing temporary staff to handle the overflow. There were backlogs amid increased new orders, particularly in agriculture.”
The Stanbic Bank 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 sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services. Data was first collected June 2016.
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%).
Legilisho said “On pricing, Ugandan firms kept output prices unchanged in January as staffing costs declined for the first time in 17 months – this was despite an increase in input prices, especially related to construction materials. Overall, firms remain optimistic about the outlook for customer demand and output over the next 12 months. Indeed, Ugandan firms have increased inventories and quantities purchased to match robust customer demand.”
According to the survey, anecdotal evidence highlighted the positive impact of rising customer numbers on the private sector in January, with firms linking this to the latest increases in output and new orders. In both cases, expansions have now been recorded on a monthly basis throughout the past year-and-a-half.
Sector data pointed to increases in activity across agriculture, construction, industry, services and wholesale & retail.
The expansion in total new business across the Ugandan private sector was supported by a renewed increase in new export orders. January’s rise was the first in three months and the strongest since mid-2023.
Efforts to keep on top of workloads following a rise in outstanding business in December meant that some firms took on temporary workers at the start of the year, thereby leading to an increase in employment. This job creation helped lead to a reduction in backlogs in January.
Meanwhile, improving customer demand fed through to increases in purchasing activity and stocks inputs. Despite rising demand for inputs, suppliers responded well to requests for faster deliveries and lead times shortened for the second month running.
Higher purchase prices were recorded in January, with panelists signaling rising costs for construction materials and food products. On the other hand, staff costs decreased for the first time in 17 months.
With overall input costs increasing, companies raised their own selling prices again in January, although the vast majority of respondents kept their charges unchanged from the previous month.
Business sentiment remained positive at the start of 2024, with companies expecting customer numbers to continue to rise over the coming year, feeding through to expansions in output. More than 82% of respondents predicted an increase in activity over the next 12 months.
