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.