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Health Of Ugandan Private Sector Improves

Uganda’s private sector continues to recover, according to a new report.

According to Stanbic Bank Uganda’s PMI index for March, the headline figure hit 53.2 in March, up from 51.1 in February indicating a further improvement in the health of the private sector.

Commenting  on  March’s  survey  findings,  Jibran Qureishi,  Regional  Economist  E.A  at  Stanbic  Bank said: “Operating  conditions  in  Uganda’s  private  sector further improved, however the PMI average of 52.1 in  Q1:2018  was  lower  than  54.0  average  recorded in  Q4:2017,  suggesting  to  us  that  the  pace  of recovery  is  still  sluggish.  That  being  said,  credit growth to the private sector should broadly recover over  the  course  of  this  year  courtesy  of  the accommodative monetary policy stance adopted by the  Bank  of  Uganda  in  addition  to  improving domestic demand conditions.”

In February 2018 Bank of Uganda further reduced the Central Bank rate by another 0.5 of a percentage point to 9.0% resulting in the lowest CBR since the benchmark figure was introduced in 2011. In response Stanbic Bank which maintains a policy of matching adjustments of the CBR with equal changes to its Prime Lending Rate announced another reduction of its PLR to 17% effective 1st of May. The Bank now has the lowest Shillings lending rate of all the banks active in Uganda’s credit sector.

Revealing the underlying reasons behind the PMI’s sustained upward trajectory, Benoni Okwenje, Stanbic Bank’s Fixed Income Manager noted “Forming the basis for growth was an increase in new business.  Private sector firms reacted by expanding their workforce numbers at the end of the first quarter.  Consequently, business activity rose for the fourteenth month in succession.  Elsewhere,  output charges  continued  to  rise,  driven  in  part  by  higher  cost burdens.”

He continued, “Meanwhile,  higher  volumes  of  new  orders  spurred businesses to increase their purchasing activity in March, following  a  month  of  contraction  mid-quarter. However, due to production demands, inventories fell for the second month in succession. On the price front however, higher purchase and staff costs led to a sustained increase in overall input costs in the private sector during March. In fact, input price inflation occurred across all five monitored sub-sectors, in line with the survey trend so far. Higher raw material prices alongside fuel costs drove up purchase prices, whereas rising costs of living was the main factor influencing average wages/salaries.”

 

The Stanbic PMI is a composite index, calculated as a weighted average of five individual sub-components: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

Taddewo William Senyonyi
https://www.facebook.com/senyonyi.taddewo
William is a seasoned business and finance journalist. He is also an agripreneur and a coffee enthusiast.

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