Business activity in May rose to the highest extent recorded so far this year, propelled by stronger demand, according to a survey of purchasing executives in 400 private sector companies.
The Stanbic Bank Uganda purchasing managers’ index, produced by IHS Markit, rose to 53.9 in May up from 51.8 in April, signalling a further improvement in business conditions in the private sector. A PMI reading above 50 indicates a rise in business activity while one below 50 shows a decrease.
Managers surveyed said an increase in demand led to a further rise in new orders, with output rising across all five monitored sub-sectors as a result. The executives credit successful marketing activities for the increase in consumer demand.
“This trend is consistent with improving domestic demand and the very impressive quarterly GDP numbers that were recently published,” Jibran Qureishi, the regional economist for East Africa at Stanbic Bank said.
But a sustained rise in production costs continues to threaten the gains from the new business. The purchasing executives cited higher production and staff costs, which they attributed to rising fuel prices, higher taxes, and increased living costs.
The rise in production and staff costs was intensified by the higher numbers of workers they took on and the need for more inputs. Employment increased for the 24th month in a row in four of the five subsectors, while purchasing activity grew for the third straight month.
Not surprisingly, firms increased the prices of their goods and services, although this was observed in construction and wholesale and retail. Output prices declined in agriculture and industry, and were stagnant in services.
With the 2018/19 budget to be read next week, “the market will be keen to assess whether the government will be factoring in any oil sector developments in revenue or expenditure plans, while the private sector will also be interested to see if the government comes up with a business-friendly budget which would needless to say encourage private investment,” Mr Qureishi said.