Private sector activity maintains positive momentum, but external orders continue falling – IHS Markit

Activity in the private sector in April was unchanged from a month ago, when a new survey of purchasing managers found that business conditions had improved from the previous period.

The purchasing managers’ index for Uganda’s private sector was 53.5 in April, the same as in March, global research house IHS Markit said, with positive readings for output, new orders, employment, and stocks of purchases. “Only the trend in suppliers’delivery times exerted a negative impact,” Markit said.

The survey, which is sponsored by Stanbic Bank, asks managers in 400 private sector companies in agriculture, construction, industry, services, and wholesale and retail about business conditions. The executives provide information on new orders, output, new staffing, suppliers deliveries, and inventory levels.

April’s reading is the third consecutive expansion this year, and above the average for the first quarter, which was 50.7. 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.

“Although these are still early days in the collection of the survey data, it is evident that Uganda’s private sector is gradually regaining some much needed momentum,” Jibran Qureishi, Regional Economist East Africa at Stanbic Bank said. “We suspect this has been driven by the accommodative monetary policy stance over the past year or so, which will gradually begin to stimulate economic activity.”

Three of the five sectors – agriculture, services, and wholesale and retail – reported an improvement in business conditions, while construction and industry indicated deteriorations.

Private sector output and new orders rose for the third successive month, with company managers attributing this to increases in new business and robust demand from the domestic market. The rise was recorded in agriculture, services, and wholesale and retail; construction and industrial companies reported declines.

However, “the trend in new export business contracted, continuing a trend observed in each month since the survey started in June 2016,” Markit said. Of the surveyed companies, 39% reported a decrease in new export business, 33% said there was no change from the previous month, while 28% reported an increase.

There was a rise in employment in 11% of the surveyed companies versus 6% who reported a decline. The agriculture, industry, and service sectors saw a rise in staffing levels while construction and wholesale and retail reported lower numbers.

Input costs rose, in keeping with a trend observed since the survey started. This was mainly due to an increase in higher purchase prices, and a rise in wages and salaries. About 40% of the companies reported a rise in input costs, while 13% said they fell.

The increase in the prices of inputs – particularly animal feeds, foodstuffs, raw materials, and sugar – saw companies raise the prices they charged for their output. 13% of the firms raised prices, while only 4% indicated they had lowered them. The rise in output prices was recorded across all the five sectors covered by the survey.