October 03, 2018

Business optimism rises in Uganda during September

October 3, 2018—The latest Stanbic Bank Uganda Purchasing Managers’ Index (PMI) puts the September reading at 54.2 up from 52.1 in August and above the 50.0 threshold for the twentieth successive month. This comes despite the isolated civil disturbances in the past month associated with rising opposition leader, Bobi Wine.

Improving quality of manufactured goods has helped fill the order books of several Ugandan companies  and resulted in a rise in inputs.

Central to the latest strengthening of business conditions was a further rise in new orders. These have increased in each month since February 2017, with panelists reporting that good quality products had helped to stimulate client demand. This measure of private sector outlook has been above 50.0 since the survey began in June 2016.

Stanbic Bank Head of Fixed Incomes Benoni Okwenje said, “Rising customer demand also encouraged companies to engage in input buying. Purchasing activity increased for the seventh successive month, with stocks of purchases also expanding in September. Despite rising demand for inputs, suppliers continued to shorten the time taken to deliver purchased items.”

Data for the monthly PMI is compiled from replies to questionnaires sent to purchasing executives in approximately 400 private sector companies, which have been carefully selected to accurately represent the true structure of the Ugandan economy, including agriculture, construction, industry, services and wholesale and retail.

Okwenje said, “Overall input prices rose amid higher prices for purchases and staff as well as increased electricity and water bills. Higher purchase prices were due to rising costs of raw materials such as stationary, food items and construction materials.”

Increased customer numbers contributed to a rise in output at the end of the third quarter. Activity has now increased in 20 consecutive months.

Okwenje said suppliers have continued to shorten the period to deliver orders to customers.

As has been the case throughout the survey so far, Ugandan companies increased their staffing levels during September. Anecdotal evidence suggested that employment had been raised in response to higher new orders.

Jibran Qureishi, Stanbic Regional Economist East African, Global Markets said, “The private sector made a swift turnaround in September as the PMI rose to its highest level since December 2017. Sporadic riots in parts of the country had slowed down economic activity last month, however domestic demand is clearly looking up. In fact, firms raised output costs in September, something they wouldn’t have easily decided to do if domestic demand was weak.”

Overall input prices rose amid higher prices for purchases and staff as well as increased electricity and water bills. Higher purchase prices were due to rising costs of raw materials such as stationary, food items and construction materials.

Ugandan companies responded to higher input costs by raising their output prices. Four of the five broad sectors posted increases in charges, the exception being agriculture where a fall was recorded.

The 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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