Home Economy Uganda’s private sector now shows strongest growth since 2016

Uganda’s private sector now shows strongest growth since 2016

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Activity in Uganda’s private sector recorded its strongest growth in October since the start of a monthly survey of 400 purchasing executives, supported by rising customer numbers and improving demand.
The Stanbic Bank Uganda purchasing managers’ index, produced by global research firm IHS Markit, rose to 56.6 in October, up from 54.2 in September. That reading was above the average recorded since the survey began in June 2016, and also indicated that business conditions in the private sector have improved for the 21st straight month.
A PMI above 50 shows there is some level of increased activity from the previous month, while a reading below 50 signifies a contraction. A PMI at 50 indicates that there was no change.
Output and new orders continued expanding, keeping with a trend they’ve followed since February 2017, IHS Markit said. The survey’s respondents attributed this to an increase in customer numbers and improved demand. All five monitored sectors – industry, agriculture, wholesale and retail, services, and constructed – posted an increase in output.
Firms also increased their workforce numbers to deal with the rise in demand, a trend that goes back to the start of the survey. In particular, the agriculture, services, and construction sectors registered an increase in staffing levels.
Another enduring trend observed last month was an increase in costs for private sector firms. “Alongside higher purchase prices and staff costs, respondents also noted increases in prices for fuel, water, and electricity,” the survey said. “The latest rise in purchase costs reflected higher prices for materials such as food, ink, and stationery.”
But Jibran Qureishi, the regional economist for East Africa at Stanbic Bank believes the rising costs for firms were offset by the strengthened domestic demand. Mr Qureishi said the strong growth captured by the index is an indicator of the economy’s strong underlying fundamentals which are set to deliver an expansion of above “6.0% in 2018.”
“Good rains expected in the fourth quarter could support the agrarian sector and subsequently economic activity,” Mr Qureishi added.
Output prices also continued to increase, a result of the rise in firms’ output costs. However, only industry, services, and wholesale increased the prices of their output, with declines registered in construction and agriculture. The fall in selling prices for agricultural output mirrors annual inflation trends observed in the month.
The survey also showed that inventories levels went up as firms raised purchasing activity for the eighth successive month to meet the growth in new orders. Delivery of orders improved due to their timely placement.

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