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Private Sector Reports Better Business

A new study of the private sector operations in Uganda shows an increase in the rate of job creation across sectors in Uganda.

The study done over the month of April on corporate companies found that staffing levels rose in response to greater new orders, which also encouraged higher business activity as the second quarter of 2023 began.

The Purchasing Managers Index (PMI) compiled by market intelligence firm, S&P Global, which measures the economic activity levels and managers’ perspective of the environment, rose to 55.4 in April, up from 53.2 in March.

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.

For the sixth successive month, the latest reading is above the 50.0 no-change mark and well above its average since the survey began in June 2016.

Every company enjoys high demand for its products because it leads to higher profits. But it also means the companies will increase output levels to meet the demand or the rising orders.

This leads to increased purchases of inputs, demand for services like transportation as well as the need and ability to raise recruitment.

According to the April report, commissioned by the Standard Bank Group, an increase in revenues for businesses encouraged companies to expand purchasing activity, and for the first time in three months, there was also an expansion in employment.

However, there is a renewed increase in output prices according to the April study, and this was attributed to the increase in the cost of inputs.

Overall input costs increased again in April amid reports of higher charges for fuel and utilities, alongside sustained purchase price inflation and a renewed rise in staff costs.

The increase in purchase prices often reflected higher cement costs, while higher employee expenses were generally attributed to rising staffing levels.

In the previous two months, a decline in new jobs was reported across most sectors, and it is hoped that this renewed upward trend in recruitment rates will continue.

“Growth was broad-based, with agriculture, construction, industry, services, and wholesale and retail all showing output growth in April, fueled by local demand while new export orders fell for the fourth month in a row,” according to Standard Bank economist, Mulalo Madula.

The Stanbic PMI is compiled from responses to questionnaires sent to purchasing managers in a panel of around 400 private sector companies, covering agriculture, mining, manufacturing, construction, wholesale, retail, and services, among others.

New Orders contribute 30 percent of the index, output accounts for 25 percent, and employment 20 percent, while suppliers’ delivery times constitute 15 percent of the index, and 10 percent is from stocks of purchases.

For the first time in three months, the supplier’s delivery time dropped in April, meaning supplies were delivered faster.

Madula says there is a lot of optimism from the executives over the next year.

“Firms were generally upbeat about the outlook for business activity in the next 12 months. 73 percent of respondents anticipate an increase in output over the next 12 months which should encourage businesses to expand their planned investments,” he says.

Panelists reported success in securing new orders amid improving demand conditions, thereby feeding through to the growth of output.

This rhymes with the Bank of Uganda’s forecast of increasing consumer demand earlier this year, as it expected the spending power of the people to continue rising.

BOU expects economic growth to rise to 5.3 percent this year and 6 percent next year.

Increased customer numbers amid an improving demand environment are said to have supported the latest strengthening in the health of the country’s private sector.

The index shows new business expansions for the ninth month running, with only 15 percent of respondents reporting a decrease in expansion rates.

Firms in Uganda were generally optimistic that demand conditions will continue to improve over the coming year, supporting confidence in the 12-month outlook for business activity.

Around 73 percent of firms expressed an optimistic outlook, with less than 1 expressing a pessimistic view.


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