A gauge of Uganda private sector activity rose to its highest level in eight months, a sign that the economy is regaining momentum following the relaxation of Covid-19 restrictions.
IHS Markit, the international research firm, on Thursday said the Stanbic Bank Uganda purchasing managers’ index rose to 54.9 in January from 51.5 in December. A reading above 50 indicates that business conditions in the private sector are improving, while a reading under 50 signals contraction.
Business activity in January improved mainly because of “the reopening of schools following an extended period of closure due to the Covid-19 pandemic,” IHS Markit, which compiles the survey, said. The reopening of schools was the first stage in a staggered reopening of the economy announced by President Museveni in his new year address; the transport sector and entertainment venues were also fully reopened later in the month, and the 7pm-5am curfew lifted.
Related: Inflation slows in January as transport costs drop
In addition, an overwhelming majority of survey respondents were optimistic about future business conditions, their positivity hinged on the reopening of schools and confidence that the worst of the coronavirus pandemic has passed, as well as a rise in new orders in the next 12 months. The recent final investment decisions for Uganda’s oil projects also “reinforce the positive outlook,” according to Ferishka Baruth, the economist for Africa regions at Stanbic Bank.
Private sector companies reported a rise in demand in January, which drove up output, employment, and purchasing activity. As a result, private inventory levels increased, assisted by faster supplier delivery times. New orders improved for the sixth straight month, while new-export-orders, a gauge of external demand, rose for the first time in 17 months.
However, surging prices of raw materials – resulting from higher fuel costs – and higher labour costs saw companies pass costs through to the customer – by increasing selling prices for the fifth consecutive month.
