Private sector activity improves in March, new Stanbic survey shows

Stanbic’s chief executive, Patrick Mweheire, left, and Chris Mukisa, the director macroeconomic statistics – UBOS, at the launch of the Purchasing Managers’ Index in Kampala. Photo: Courtesy.

Stanbic Bank launched a new survey on Wednesday covering the private sector, the Purchasing Managers’ Index, produced in conjunction with global analytics and critical information provider, IHS Markit.

The new index is a leading indicator that measures private sector conditions to give a picture of what is happening in the business world. The 400 surveyed companies were selected to “represent the true structure of the Ugandan economy,” according to Anne Juuko, Stanbic’s head of global markets.

Business activity picked up in March, with the index coming in at 53.5 from 50.9 in February, the purchasing managers’ survey showed. This indicated a further improvement in business conditions in the private sector during the month.

The PMI asks business managers about new orders, output, new staffing, suppliers deliveries, and inventory levels. A PMI above 50 points at an improvement in business conditions, while a reading below 50 signifies a contraction. A PMI at 50 indicates that there was no change.

The reading for the first three months of this year however shows a decline in business activity compared to the last quarter of 2016, with a reading of 50.7 compared to 53.1 for the previous period. This is after the index fell to below 50 in January, the first time it was doing so in 10 months.

March’s improved reading showed that Uganda’s private sector is recovering from the effects of the last election cycle and the downtown in global economic conditions, according to Ms Juuko. The survey indicated improved operating performances in the agriculture, industry, services, and wholesale and retail sectors.

Ms Juuko said new orders increased in March, with more jobs created as a result in the agriculture, services, and wholesale and retails sectors. The rise in new staffing levels, however, led to an increase in staff costs. Industry was the outlier, recording lower employment.

The managers also cited the larger workforce as being behind the depletion of outstanding business, as it made it possible to complete existing contracts.

“The rise in total new work was hampered by falling exports, however,” according to IHS Markit. “New business from abroad has fallen in all ten months of data collection so far, the latest decrease reflecting weaker demand from European markets.”

The survey also showed that costs continued to rise in the month, reflecting higher purchase prices – a result of increased input buying activity.

The index will be released every fourth working day of the month by Stanbic Bank. It will come out in advance of comparable official economic data from the Uganda Bureau of Statistics and the Bank of Uganda.

The statistics bureau’s quarterly GDP estimates are released at the end of every quarter for the previous quarter – the latest data, for the last three months of 2016, shows that real GDP growth was 0.8% compared to a decline of 0.1% in the previous quarter.

Bank of Uganda’s Business Tendency Index, launched in July 2012, collects data on business perceptions and expectations by surveying business leaders. It is used for “for monitoring business situations and forecasting short-term economic developments and is an input in monetary policy formulation.”

In March, the central bank’s business tendency indicator rose to 55.2 – its highest level in six months – up from 54.9 in February.

The Stanbic-sponsored PMI is Uganda’s “first private sector-led PMI series,” said Kenneth Egesa, the director of statistics at Bank of Uganda. “Usually when we go to the private sector to collect data, it’s a little bit of a challenge to get the data,” he added.