Business conditions in Uganda’s private sector continued to strengthen in January on the back of improving customer demand, according to an indicator of the sector’s economic health.
The Stanbic Bank Uganda purchasing managers’ index rose for the twenty-fourth straight month in January to 57.5, up from 56.6 in December 2018. A PMI reading above 50 signifies an improvement in business conditions compared to the previous month while one under 50 indicates a contraction.
“Signs of stronger customer demand resulted in a further expansion of new business during January, extending the current sequence of growth to two years,” said a statement by IHS Markit, the international research firm that produces the index. “Ugandan companies raised output as a result.”
Another consequence of the rise in new orders was the hiring of more workers in agriculture, industry, services, and wholesale and retail firms. This also enabled the companies to fulfil the increased orders.
Firms across all five monitored sectors also recorded an increase in overall input prices due to a rise in electricity, fuel, and water prices. Consequently, input costs rose in four of the five sectors, the exception being agriculture where they stayed unchanged.
Additionally, purchase and staff costs continued to rise driven by an increase in the prices of food, fuel, stationery, and timber. This pushed firms to raise the prices of their outputs—although some firms were reported to be offering discounts, according to IHS Markit.
“Increasing customer demand encouraged Ugandan companies to raise both their purchasing activity and inventory levels at the start of the year,” said IHS Markit.
It added: “Despite rising demand for inputs, suppliers’ delivery times shortened again amid transport infrastructure improvements and timely ordering.”
The index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in approximately 400 private sector companies selected to represent the true structure of the Ugandan economy. The companies are drawn from the agriculture, construction, industry, services, and wholesale and retail sectors.