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Stanbic Uganda’s PMI points to consistent economic growth

KAMPALA, Uganda–Stanbic Bank’s Purchase Managers Index (PMI) posted 51.1 in February down from 52.0 in January, signaling a moderate improvement in business conditions in the private sector, marking the thirteenth consecutive month of strengthening operating conditions since the survey was launched in June 2017.   

Commenting on February’s survey finding, Jibran Qureshi, Regional Economist East Africa at Stanbic Bank said, “Business conditions in Uganda’s private sector continued to improve, albeit at a more moderate pace in February. The Bank of Uganda’s (BOU) MPC upgraded its GDP growth forecast for FY2017/18 to a range of 5.0% – 5.5% y/y from their previous forecast of 5.0% y/y. On annual basis the BOU expects GDP growth in 2018 to expand by 5.0% – 6.0% y/y, broadly in line with our own expectation of 5.6% y/y.”  

This follows the cut in the Central Bank Rate down from 9.5% to 9% by Bank of Uganda which indicated an improvement in economic growth and projected an economic growth of 6% guided by a drop in non-performing loans to 5.6% from 10.5% and a revival in private investment activity.  

According to Stanbic Bank’s Fixed Income Manager Benoni Okwenje, the Central Bank’s projections are aligned with this month’s PMI survey which signals an improvement in business conditions. “Output growth was observed in the industry, services, construction and wholesale & retail sub-sectors. Anecdotal evidence linked the expansion to a number of new projects amid stronger underlying demand. Indeed, new orders rose further mid-quarter, with businesses citing intensive marketing efforts as the driving force.”  said Benoni 

In regard to purchasing activity, Benoni noted “purchasing activity contracted for the first time in nine months due to delay in payments which prohibiting buying. Inventories reduced for the first time in the survey’s history and panelists blamed the use of inputs to support output growth and the fall in purchasing for the decline.”   

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 deterioration.