November business activity expands the most in almost 4 years

The Stanbic Bank Uganda Purchasing Manager's Index (PMI), considered a good indicator of private sector health, expanded at the fastest pace in close to four years

Apartment blocks in Nalya Housing Estate, Kampala
Apartment blocks in Nalya Housing Estate in Kampala, November 12, 2019. Photo: Uganda Business News

Business activity in Uganda expanded at the fastest pace in close to four years in November on improved demand, an IHS Markit survey showed on Wednesday.

Private sector companies reported a growth in business activity for the 34th straight month, with increases in new orders, output, and employment.

The seasonally adjusted headline Stanbic Bank Uganda Purchasing Manager’s Index (PMI), which is considered a good indicator of the health of the private sector, rose to 58.6 from October’s 56.3.

That was well above the 50 mark separating growth from expansion, and the fastest private sector expansion since the survey started in January 2016.

“The latest reading remains above the historical series average. A stable exchange rate, lower input costs for firms and the ongoing coffee season has largely anchored the private sector,” said Jibran Qureishi, the regional economist for East Africa, global markets, at Stanbic Bank.

Growth in business activity was recorded across the agriculture, construction, industry, services, and wholesale and retail sectors, with only mining reporting lower activity.

Some purchasing managers said the rise in output at their companies was due to competitive pricing, while others said it was due to an increase in customer demand. New orders also expanded last month, driven by the improvement in demand.

Companies also continued to hire more workers to reduce backlogs of work, with employment rising for the 42nd consecutive month in November.

But inflation remains a sticky cost for companies, with input prices rising last month, driven by purchase prices, staff costs, and electricity prices. In response, companies raised their selling prices.

Forward-looking indicators in the survey suggest that output growth will continue into 2020, with higher new orders leading to an increase in firms’ purchasing activity and inventories. Business expansion plans and the opening of new branches are also expected to drive growth in output over the next year.