Business confidence maintains positive course in March

In Summary

April 5, 2018 – Business confidence in Uganda maintained a positive trajectory with Stanbic Bank Uganda’s […]

New costruction led the way in economic acivity during Janaury

Monetary easing encouraged firms to expand capacity and hire during March

April 5, 2018 – Business confidence in Uganda maintained a positive trajectory with Stanbic Bank Uganda’s March 2018 Purchasing Managers Index (PMI) rising to 53.2 from 51.1 in February.

Although lower than the number for Q4, 2017, the index that captures purchasing and hiring actions by businesses is indicative of sustained if sluggish momentum.

“Operating  conditions  in  Uganda’s  private  sector further improved, however the PMI average of 52.1 in  Q1:2018  was  lower  than  54.0  average  recorded in  Q4:2017,  suggesting  to  us  that  the  pace  of recovery  is  still  sluggish.  That  being  said,  credit growth to the private sector should broadly recover over  the  course  of  this  year  courtesy  of  the accommodative monetary policy stance adopted by the  Bank  of  Uganda  in  addition  to  improving domestic demand conditions,” Jibran Qureishi,  Regional  Economist  E.A  at  Stanbic  Bank said of  the  March’s  survey  findings.

The Bank of Uganda struck 50 basis points off its policy rate in February 2018 to settle at 9.0pc, the lowest CBR since the benchmark policy was introduced in 2011.

Stanbic mimicked the central bankers move, reducing its Prime Lending Rate, the lowest in the industry, to 17pc starting May 1.

The bank attributes the sustained confidence to an increase in new business. “Forming the basis for growth was an increase in new business.  Private sector firms reacted by expanding their workforce numbers at the end of the first quarter.  Consequently, business activity rose for the fourteenth month in succession.  Elsewhere,  output charges  continued  to  rise,  driven  in  part  by  higher  cost burdens,” said Benoni Okwenje, Stanbic Bank’s manager for Fixed Income.

He added that  higher  volumes  of  new  orders  spurred businesses to increase their purchasing activity in March, following  a  month  of  contraction  mid-quarter.

“However, due to production demands, inventories fell for the second month in succession. On the price front however, higher purchase and staff costs led to a sustained increase in overall input costs in the private sector during March,” he said observing that input price inflation occurred across all five monitored sub-sectors as higher raw material prices and fuel costs drove up purchase prices, whereas the rising cost of living was the main factor influencing average wages.


The Stanbic PMI 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.

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