Uganda’s private sector recorded its slowest growth in four months in August, dampened by declines in conditions in agriculture and wholesale and retail.
The Stanbic Bank Uganda Purchasing Managers’ Index, a monthly survey of purchasing executives in 400 private sector companies, dropped to 52.1 in August — below the survey’s 27-month average of 52.8 — from July’s 53.2. Still, this was above the 50-point level that signals an improvement in business conditions on the previous month.
IHS Markit, the global research firm which produces the index, said most firms attributed improving business conditions to stronger underlying domestic demand. “This led to expansions in output, new orders and employment during the most recent survey period.”
Only industry and the services sector of the five surveyed reported an increase in new orders, however. External orders also declined, the survey said.
All sectors, save for agriculture, reported an increase in output during the month.
“While Uganda’s private sector is still growing, the pace of acceleration has been slowing down over the past three months or so. Back in June and July exchange rate volatility was largely culpable for this,” said Jibran Qureishi, the regional economist for East Africa at Stanbic Bank.
He added that “the sporadic riots in parts of the country over the last month could have disrupted trade and business in various parts of the country.”
Cost inflation across all the five sectors was also observed, continuing a trend that has been present since the survey was started in June 2016. Purchasing executives pointed to increasing staff costs and purchase prices; the rise in purchase prices was blamed on more expensive raw materials and higher fuel prices. As a result, companies also increased their prices.
Staffing levels also rose across all sectors, IHS Markit said, which partly explains the rise in staff costs. This led to a reduction in outstanding orders, even as new orders increased. This increase in activity, to clear the orders, led to companies making more purchases.