Private sector activity growth falls for third consecutive month

Activity in Uganda’s private sector eased in October as political events in export destinations decreased new business from abroad.

The Stanbic Bank Uganda purchasing managers’ index (PMI) dropped to 52.8 from 53.8 in October. A figure above 50 shows an improvement in business conditions from the previous month, while a figure below 50 indicates a deterioration.

Rises in output, total new orders, employment, and stocks of purchases supported the overall improvement in the official index. Most respondents to the survey pointed to a larger customer base and an increase in underlying demand for influencing the improvement.

However, the index, which is based on a survey of purchasing executives in approximately 400 private sector companies, has slowed for three consecutive months. Jibran Qureishi, Stanbic Bank’s regional economist for East Africa, said this is due to “enhanced and prolonged political risks in Uganda’s key trading partner, Kenya.

“In fact, new orders slumped quite sharply during this period reflecting the sluggishness in trade between the two countries,” Mr Qureishi said. “However, as political risks subside in neighbouring Kenya over the coming months and public expenditure on infrastructure rises, growth in Uganda will probably continue to remain on an upward trajectory.”

Of the five monitored sectors, increases in output and new business flows were registered for agriculture, services, construction and wholesale and retail, while the industry sector saw declines. Employment, on the other hand, expanded in businesses across all sectors.

Input costs rose for the seventeenth consecutive month across all sectors, driven by both higher purchase costs and rising salary payments. As a result, firms increased the prices of their products and services, although this was recorded in agriculture, services, and wholesale and retail sectors.