Private sector growth hits record in January

The latest reading of Uganda's private sector PMI reached 58.8 in January, the highest figure on record

Growth in Uganda’s private sector rebounded to a record high in January as demand further improved, according to a survey by IHS Markit.

The Stanbic Bank Uganda Purchasing Managers’ Index (PMI) rose to 58.8, the highest figure in the survey’s history and up from 57.7 in December. Readings above 50 indicate an expansion in activity in the private sector.

The latest reading also marked 36 straight months of growth in business conditions in the private sector.

“Private sector activity started off the year well,” Jibran Qureishi, regional economist for East Africa at Stanbic Bank’s global markets unit, said in a statement. “This is a trend we broadly expect to persist over the coming year as the capital stock is likely to rise on the back of increased public investment in infrastructure.”

He added that more favourable weather conditions this year could also lead to a rebound in the agriculture sector. “This should help GDP growth recover to around 6% from our estimate of 5.5% in 2019,” Mr Qureishi said.

Further growth in new orders, driven by an increase in customers and good quality products, and stronger rates of output anchored activity growth in the private sector in January, according to IHS Markit. Additionally, suppliers’ delivery times quickened, reversing the deterioration recorded the previous month.

However, input prices continued their upward trend, with respondents pointing at higher rents, utility costs, as well as purchase and staff costs. As a result, companies increased their output prices.

IHS Markit said that output is expected to rise over the next 12 months on the back of business investment and increases in new orders. “More than 71% of panellists were positive regarding the outlook,” said Markit.