The Ugandan Private Sector registered an improvement in Business conditions in October. There were increases in output, new orders, employment numbers and stock purchases. The headline Stanbic PMI index registered a 52.8 reading.
Releasing the October Stanbic PMI findings, Jibran Qureishi, Stanbic Bank’s Regional Economist for East Africa revealed, “We continue to see a gradual improvement in business conditions within the private sector in Uganda, although the pace of improvement has slowed down somewhat since August. We attribute this to the prolonged political impasse in Kenya which is by far Uganda’s leading trade partner. ”
He continued, “However, as political unrest in Kenya subsides in the coming months following the conclusion of the repeat Presidential elections and public expenditure on infrastructure in Uganda starts rising, growth will most likely return to a much faster upward trajectory.”
Uganda is currently undertaking the construction of a number of large scale infrastructure projects with many more in the pipeline, key to their successful execution is the port of Mombasa which accounts for about 70% of all imports. Political instability in Kenya tends to slow down processing times considerably at the port, leading to project delays with many contractors lacking the much needed raw materials and equipment necessary to carry out construction.
Analysing the five monitored sectors Okwenje Benoni, Stanbic Bank’s Fixed Income Manager noted, “Agriculture, services, construction, wholesale & retail registered significant increases in output. In response companies attempted to cope with higher demand by increasing capacity by expanding employment which resulted in higher jobs figures.”
Meanwhile, inflationary pressure was evident again as overall input costs rose for the seventeenth consecutive month. Evidence suggested that input price inflation was driven by both higher purchase costs and rising salary payments.
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 deterioration.