Private sector activity expands at slower pace in January

The expansion in private sector activity was led by increased expenditure in the construction sector, according to IHS Markit. Credit: Xinhua

Activity in Uganda’s private sector increased at a slower pace in January compared to the previous month, according to an index that tracks its economic health.

The Stanbic Bank Uganda Purchasing Managers’ Index came in at 52.0 in January, from 54.3 in December, indicating a further improvement in business conditions. A PMI above 50 shows 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 latest expansion was the twelfth in as many months. The index is produced by global research firm IHS Markit, and is a monthly survey of purchasing executives in 400 private sector companies selected to represent the true structure of the economy.

The expansion was led by increased expenditure in the construction sector, IHS Markit said. There was also an increase in new orders as a result of stronger domestic and global demand. Greater marketing efforts also contributed to the rises in new orders and output across the five monitored sectors.

Jibran Qureishi, Regional Economist East Africa at Stanbic Bank, noted that the improvement in the index over the past twelve months supports the bank’s projection of GDP growth between 4.5% and 4.8% in 2017.

“We expect both an improvement in agricultural productivity and an increase in public investment in infrastructure to support economic activity over the coming year, which is why we see GDP growth expanding by 5.6% in 2018,” he added.

Firms reacted to the increase in new orders and output by increasing their payroll numbers. Employment rose in all sectors save for the services sector.

All the five monitored sectors – agriculture, services, wholesale and retail, construction, and industry – registered a further rise in input costs, as greater demand pushed up cost pressures. Both purchase prices and staff costs increased in January, the report said.

This led to an increase in average selling prices. Output prices were reported across four of the five sectors, the exception being industry.