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Uganda’s Business Conditions Improving-Report

Uganda’s business conditions continue to improve despite a slight decline in September, a latest report on the economy says.

Announcing the Stanbic Bank Purchase Managers Index (PMI) for September at a press briefing in Kampala,  Jibran Qureshi, the Standard Bank’s regional economist for East Africa noted: “Even  though  the  headline  PMI  fell  to  53.8  from 54.1  in  August,  the  average  of  54.1  in  the  three months  to  September  was  still  higher  than  the average of 51.6 in the first half of the year.”

He added: “A strong performance  from  the  coffee  sector  has  supported growth,  however  the  recent armyworm  infestation could still pose as a threat to food crops prices and agricultural  productivity  towards  the  back  end  of the  year.  That  said,  a  gradual  improvement  in private  sector  credit  growth  should  bode  well  for domestic demand. ”

The Ugandan private sector is being encouraged to increase its appetite for credit in a bid to boost economic activity.

In the recent monetary policy statement for October the Central Bank announced a further downward revision of the Central Bank Rate (CBR), the fifth in the past nine months.

At just 9.5%, the CBR now stands at its lowest level since the introduction of the CBR in 2011.

The Governor Emmanuel Mutebile explained the reasoning behind the rate cut, “Given that annual  core inflation is forecast to remain around the  medium term  target  of  5% and  economic  activity  is  slowly  gaining momentum,  a  cautious  easing  of  monetary  policy  is  warranted  to  boost private  sector  credit  growth  and  to  strengthen  economic  growth.”

Analysing the performance of the various business sectors Stanbic monitors to conduct the PMI research, Jibran revealed, “The agriculture, industry, services and wholesale & retail sectors  continued  to  register  growth  of  output  and  new business  inflows  in  September. Meanwhile, construction output decreased as the sector saw no change in new orders.”

Overall input costs however rose across each sector.

Looking at employment where workforce numbers increased on the back of new projects and heightened demand, Jibran noted “Overall job creation is a trend we have witnessed since the inception of the survey 16 months ago.”

He continued, “Higher new orders also led Ugandan private sector firms to increase their quantities of purchases for the fourth month running.  Inventories grew as a consequence. Meanwhile,  firms  were  able  to  work  through  their backlogs  of  work,  with  the  latest  decline  in  outstanding business the sixteenth in as many months.”

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.

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