The Stanbic headline Purchase Managers Index (PMI) for the final month of 2019 saw a further improvement in business conditions in the Ugandan private sector.

Increased customer numbers support growth of output in December

The Stanbic headline Purchase Managers Index (PMI) for the final month of 2019 saw a further improvement in business conditions in the Ugandan private sector.

Although the headline PMI recorded 57.7 in December, slightly down from 58.6 in November, private sector players surveyed reported a general improvement in business conditions.

The latest reading was above the average since the series began in June 2016.

According to the survey report, rises in output and new orders resulted in on-going increases in both staffing levels and purchasing activity as firms made efforts to keep on top of workloads. Meanwhile, both input prices and output charges continued to rise.

The survey, sponsored by Stanbic Bank and produced by IHS Markit, has been conducted since June 2016 and covers the agriculture, industry, construction, wholesale & retail and service sectors.

Output increased in four of the five monitored sectors, the exception being agriculture.

Jibran Qureishi, Regional Economist E.A., Global Markets at Stanbic Bank explained, “The PMI still indicates that private sector activity has remained robust towards the end of 2019. However, the agriculture sector didn’t seem to fare as well as the service sector.

“This is notably due to the disruption of key transport routes for produce owing to heavy rainfall. Furthermore, firms looked to pass on higher costs to consumers, which would perhaps suggest that they’re confident that consumer demand is solid enough to sustain these price increases.”

According to the report, there were some issues with the delivery of purchased items, however, with supplier lead times lengthening for the first time in the series history. Panelists largely attributed delays to heavy rains which meant that roads were difficult to navigate.

Additional expansions in output and new orders were recorded in December, with each rising for the thirty fifth successive month. Respondents largely attributed growth in both to their ability to attract new customers.

Despite increasing new orders, companies again reported lower backlogs of work as they made efforts to complete projects on time.

This was achieved through increases in both employment and purchasing activity. Stocks of purchases also rose, with some firms accumulating inventories ahead of new work in coming months.

Overall input costs increased, with higher purchase prices, staff costs and utility bills all mentioned. In response to higher cost burdens, companies raised their output prices, as has been the case throughout the 43-month survey to-date.

Companies remained confident regarding the 12-month outlook for business activity, with four-fifths of respondents predicting a rise over the coming year.

“Looking ahead, key events such as the timing of the Final Investment Decision (FID) on oil will be key for growth in addition to how the weather outlook impacts the agrarian sector which has been relatively subdued for the most part of 2019,” Jibran added.

The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI™) which provides an early indication of operating conditions in Uganda.