Private sector growth stable in August – Markit

Uganda’s private sector growth remained largely unchanged in August as both output and new orders increased for the seventh consecutive month, but with a drop registered for new export orders, according to a survey of business managers.

The Stanbic Bank Uganda Purchasing Manager’s Index dropped slightly to 54.1 in August from 54.3 in July. It is still above the average recorded over the 15 months data has been collected. A PMI above 50 means there is some level of increased activity, while a reading below 50 signifies a contraction. A PMI at 50 indicates that there was no change.

The index asks purchasing managers in 400 private sector companies about current business conditions. They answer questions on new orders, output, new staffing, suppliers deliveries, and inventory level.

After remaining flat in July, the wholesale and retail sector returned to growth in August, according to IHS Markit which produces the survey. “Improvements in business conditions across the remaining sectors (agriculture, construction, industry and services) were maintained in the latest survey period,” the survey said.

Output rose across all the five sectors monitored by the survey, with 36% of respondents reporting a rise while 24% registered a decline. The firms also reported an increase in new orders, which some linked to promotional activities; 38% of survey panellists said orders increased, while 23% of firms said new business fell.

“The ongoing upturn in new orders prompted firms to engage in input buying,” the Markit report said. “As a result, input stocks accumulated for the fifteenth month in succession. Firms raised inventories due to forecasts of further improvements in market demand, according to anecdotal evidence.”

There was however a drop in new export orders, 39% of firms noting a fall in new export business versus 31% who registered an increase. Benoni Okwenje, fixed income manager at Stanbic Bank Uganda, said this was due to instability in key export markets particularly South Sudan, which is going through a civil war, and Kenya, which had elections.

The August data also showed a rise in input prices, with 34% of respondents indicating a rise and 11% saying they had fallen. This was due to higher purchasing prices, staff costs and other operational costs such as utility bills. Markit noted that cost inflation was registered across all five sectors.

The higher input costs saw some firms – 11% of those surveyed – passing on the higher prices to clients. Only 6% of respondents said they had not increased output prices. Construction was the only sector in which output prices did not increase.