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Private Sector Output in Uganda Continues Expansion for Eleventh Consecutive Month

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According to the monthly Stanbic Purchasing Managers’ Index (PMI), Uganda’s private sector output has expanded for the eleventh consecutive month, despite a slight drop in June. The PMI, compiled by S&P Global from surveys sent to purchasing managers in various sectors, indicates a positive outlook for the next 12 months, with over 87% of respondents predicting further expansion.

Businesses in Uganda continue to be hopeful that output will rise over the next 12 months, with this optimism frequently reflecting confidence in the acquisition of new clients. More than 87% of those polled anticipated increased activity.

The monthly Stanbic Purchasing Managers’ Index (PMI), which measures business confidence in Uganda’s private sector, fell slightly from 57.4 in May to 56.4 in June, but confidence is still high thanks to improving customer demand, which is supporting output growth because of new orders. S&P Global compiles the Stanbic PMI from replies to questionnaires distributed to purchasing managers in a panel of about 400 private sector businesses. Agriculture, mining, manufacturing, construction, wholesale, retail, and services are among the industries included by the survey.

New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%), and Stocks of Purchases (10%) make up the five indexes that make up the PMI. Readings above 50.0 suggest an improvement over the prior month in business conditions, while readings below 50.0 denote a decline.

“Despite a slight decline, the PMI indicated that the private sector remained in expansionary territory for the 11th consecutive month while remaining above the series average,” said Mulalo Madula, economist at Standard Bank. Since March 23, the indicator has consistently risen above the series average, which supports other data that demonstrate strong growth.

Despite a less favourable external climate, he said that “rising new orders boosted economic activity,” as new export orders had been in contractionary territory since the year’s commencement. According to the June poll, output has now increased each month for little under a year, with the most recent gain being associated with increased customer demand and some indications of an improved economy.

Agriculture, construction, industry, services, and wholesale & retail all saw increased activity. The panellists said they had success gaining new clients, which was consistent with the output picture. Increases in new orders prompted businesses to hire more people and increase their spending in June.

For the third month in a row, employment increased, and jobs were created in each of the five major industries. Despite some comments from panellists that new order growth was beginning to put pressure on capacity, increased worker numbers allowed businesses to manage workloads and reduce outstanding business. Indeed, with negative net exports, personal consumption expenditures make up roughly 74% of Uganda’s GDP, according to Madula. A healthy business environment is indicated by output growth that is supported by increasing demand.

The growth in inventories as a result of increased purchasing activity may herald a potential increase in production in the short to medium term. Additionally, spending on oil industry investments should continue to support growth. As a result of the rising demand, businesses kept being hopeful about the following 12 months. As a result of the most recent increase in purchasing activity and a briskening of supplier deliveries, stocks rose for the eighth month in a row.

However, rising purchase prices, Labor costs, and the cost of water and electricity all contributed to an increase in input costs. Wages and wages increased as a result of both the hiring of more employees and the offering of better pay to current employees to assist them cope with rises in the cost of living. In June, prices rose, bringing the current inflationary cycle closer to two years.

Respondents noted price increases in cement, computing equipment, electrical goods, and land within the past month. For the third consecutive month, output prices increased as a result of customers being charged higher input expenses. The only sector to defy the general trend and report a decrease in selling prices in June was industry. Although the amount of outstanding business continued to decline in June, several panellists said that the increase in new orders had begun to put pressure on capacity. Since the survey’s start, backlogs of work have been decreasing each month. Businesses in Uganda continue to be hopeful that output will rise over the next 12 months, with this optimism frequently reflecting confidence in the acquisition of new clients. More than 87% of those polled anticipated increased activity.

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