Stanbic PMI: Private sector reports rise in new orders during September

During September, Uganda’s private sector saw an increases in employment and purchasing activity as demand conditions remained favourable, resulting from the continued growth of new orders and enhanced business activity.

The monthly headline Stanbic Purchasing Managers Index (PMI) rose to 52.9 in September, up from 51.6 in August—the eleventh consecutive monthly improvement in the health of the private sector and was slightly above the series average of 52.6 where readings below 50.0 show deterioration.

Christopher Legilisho, Economist at Stanbic Bank said, “the September data pointed to a further monthly rise in business activity in the Ugandan private sector, extending the current sequence of growth to 14 months.

Employment rose for the sixth consecutive month, with firms linking the latest expansion to higher new orders and efforts to deplete outstanding business. Rising new order volumes encouraged companies to expand their own purchasing activity in the final month of the third quarter of the year. Input buying has now increased in each of the past 11 months.”

The Stanbic PMI is compiled by S&P Global from responses to questions sent to purchasing managers in the agriculture, mining, manufacturing, construction, wholesale, retail, and services sectors.

The PMI is a weighted average of the following five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%).

Optimism

Legilisho said, “The improvements in customer numbers and new orders, allied to marketing strategies, encouraged companies to expand their business activity again at the end of the third quarter. Output increased across all five broad sectors covered by the survey.”

However, the taking on of additional workers meant that staff costs increased, while firms also recorded a further rise in purchase prices. Higher cost burdens and an improving demand environment prompted companies to raise their own selling prices.

Alongside higher staff costs, firms also posted an increase in purchase prices. Among the items reported to be up in price were cement, food products and metal bars. Panelists also highlighted rises in costs for construction materials, fuel and utilities. Overall input prices rose across all five monitored sectors.

As has been the case on a monthly basis for just under a year, stocks of purchases increased during September as higher input buying fed through to a build-up of inventories. Stocks of purchases rose in industry and wholesale & retail, but fell in agriculture.

Stronger customer demand reportedly facilitated the pass through of higher input costs to clients in September. Charges were therefore up for the sixth month in a row. Purchasing activity rose in line with higher new orders, with inventories also expanding during the month.

Meanwhile, suppliers’ delivery times lengthened amid reports of shortages of items, particularly food products.

Companies remained optimistic that output will increase over the coming year, with positive sentiment generally reflecting expectations that customer numbers will continue to rise. More than 87% of respondents predicted an expansion of activity over the next 12 months.

However, new business from abroad decreased for the second successive month in the Ugandan private sector during September. In fact, new export orders have now fallen in each of the past nine months, barring an expansion in July.