Stanbic Bank PMI: Growing Customer Demand Leads to Companies Reporting Higher Output

The private sector in Uganda stated in October that rising production and new orders resulted from better consumer demand, which in turn increased employment and buying activities.

But rising fuel and construction material prices increased inflationary pressures, which in turn led to higher selling prices.

Although it was lower than September’s 52.9, October’s Stanbic Purchasing Managers’ Index (PMI) reading of 52.4 was generally in line with the average 52 of.6 since the survey’s inception in mid-2016.

“Uganda’s October PMI indicated a further improvement in private-sector activity, with both output and new orders rising for a fifteenth consecutive month due to solid client demand,” said Christopher Legilisho, an economist at Stanbic Bank. For the seventh consecutive month, the private sector saw a rise in employment as businesses brought on more permanent and temporary employees to manage rising orders and purchase activities while also clearing backlogs.

S&P Global compiles the Stanbic Bank PMI from purchasing managers’ answers to questionnaires sent to a panel of around 400 private sector businesses. Agriculture, mining, manufacturing, construction, wholesale, retail, and services are among the industries included in the study.

Only the wholesale and retail sectors of the assessed industries saw a decline in employment, new orders, and production, according to Legilisho. Nevertheless, company confidence over the forecast for consumer demand and production over the next 12 months remains strong across all sectors. In fact, Ugandan businesses raised their purchases and inventory in response to strong consumer demand. However, due to significant rains that caused delivery delays, suppliers’ delivery timeframes became longer. Indeed, El Niño circumstances during the fourth quarter had been warned about by meteorological offices across the area, with expected negative effects on economic conditions.

In addition to the challenges confronting the agriculture industry, he added, October saw a rise in input and output prices as a result of increased costs for a variety of goods and services as well as increased labor expenses. Companies reported increased expenses for building supplies, gasoline, and pharmaceuticals, among other things.

Data from October indicated that new orders increased by another month as businesses said they had more clients. Now, throughout the last 15 months, new business has increased every month. Similar to business activity, the services, wholesale, and retail sectors reported lower numbers of new orders, defying the general trend.

In response to increased new orders, Ugandan businesses kept increasing the number of employees they had on staff; these organizations reported a combination of permanent and temporary recruitment. At this point, employment has grown during the previous seven months.

A rise in purchasing activity also led to a buildup of input stockpiles, even though some businesses reported that the products had been utilized to promote production growth.

Businesses were able to manage workloads and reduce backlogs in October as a result of increased hiring and spending.

Higher purchasing prices—which are often related to fuel—wage costs, and the cost of building materials all contributed to a rise in operating expenditures. Companies responded by increasing their own fees, making the present production price inflation sequence seven months long.

Over the next year, a rise in output is anticipated. It is anticipated that the current upward trend in client numbers will continue, resulting in an increase in new orders and overall company activity. Only 1% of respondents were pessimistic, compared to almost 89% who anticipated an increase in productivity.

Additionally, after a two-month dip, Ugandan firms reported a sustained increase in new export orders during October. Respondents said that new orders were sent to a variety of places, such as Europe, Kenya, and the United Arab Emirates.