The first quarter of the year ended with a largely positive outlook as strengthening customer demand continued to drive improvements in business conditions in the Ugandan private sector, according to the Stanbic Purchase Managers Index for the month of March, released today.
The headline PMI rose to 53.2 in March, from 51.2 in February, and was above the series average of 52.4. Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
Despite the increase in output and new orders, companies still recorded a drop in employment, for the second consecutive month.
Mulalo Madula, Economist at Standard Bank said, “Uganda posted its eighth straight month of output growth as domestic demand remained strong on account of some firms offering competitive pricing to attract customers.
In fact, a decrease in selling prices was noted despite input costs continuing to increase for the 20th consecutive month.”
Madula added that this was met by increased purchasing activity and longer lead times due to higher costs and heavy rains affecting transportation.
Central to the latest strengthening of business conditions were continued improvements in output and new orders, both of which increased for the eighth month running in March.
Respondents reported increased customer numbers amid improving demand and stable economic conditions with business activity rising across each of the agriculture, construction, industry, services, and wholesale & retail sectors.
A further boost to demand was provided through price discounting by companies as output charges were reduced for the first time in just over a year-and-a-half.
The drop in selling prices was recorded despite a further increase in input costs.
Overall input prices rose for the twentieth month in a row, on the back of higher purchase costs, plus increased prices for utilities and construction materials.
‘Jobless growth’
While increased workloads have encouraged some firms to increase employment, overall, staffing levels have declined as workers resigned to seek other opportunities elsewhere.
This ‘jobless growth’ was the case, even though business operating conditions were noted to have improved in each of the past five months.
Staff costs were unchanged in March, thereby ending a six-month sequence of inflation. The lack of upwards pressure on pay was consistent with a second successive monthly reduction in staffing levels in the private sector.
While some companies increased employment in response to greater new orders, others noted a fall as workers resigned in search of opportunities elsewhere.
Despite some pressure on capacity because of the rise in new business, backlogs of work continued to fall at the end of the first quarter.
Companies increased their purchasing activity for the fifth month in a row, with higher input buying feeding through to an accumulation of stocks of purchases.
Suppliers’ delivery times lengthened for the second month running, with delays linked to higher costs and heavy rains causing transportation problems.
Going forward, companies remained optimistic that output will continue to rise over the coming 12 months, with confidence supported by predictions of ongoing improvements in customer demand.
