Business

Increased customer numbers support growth of output and new orders in December – Stanbic PMI

The Stanbic headline Purchase Managers Index (PMI) for thefinal month of 2019 saw a further improvement inbusiness conditions in the Ugandan private sector. Although the headline PMI recorded57.7 in December,slightly downfrom 58.6 in November, private sector players surveyed reported a general improvementin business conditions.

The latest reading wasabove the average since the series began in June 2016.

According to the survey report, risesin output and new orders resulted in on-going increases inboth staffing levels and purchasing activity as firms madeefforts to keep on top of workloads. Meanwhile, both inputprices and output charges continued to rise.

The survey, sponsored byStanbic Bank and produced by IHS Markit, has beenconducted since June 2016 and covers the agriculture,industry, construction, wholesale & retail and servicesectors. Output increased in four of the five monitored sectors, theexception being agriculture.

JibranQureishi, Regional Economist E.A., GlobalMarkets at Stanbic Bank explained, “The PMI still indicates that private sector activity hasremained robust towards the end of 2019. However, theagriculture sector didn’t seem to fare as well as the servicesector. This is notably due to the disruption of key transportroutes for produce owing to heavy rainfall.Furthermore, firms looked to pass onhigher costs to consumers, which would perhaps suggestthat they’re confidentthat consumer demand is solidenough to sustain these price increases.”

According to the report, there were some issues with the delivery of purchaseditems, however, with supplier lead times lengtheningfor the first time in the series history. Panellists largelyattributed delays to heavy rains which meant that roadswere difficult to navigate.

Additional expansions in output and new orders wererecorded in December, with each rising for the thirtyfifthsuccessive month. Respondents largely attributedgrowth in both to their ability to attract new customers.

Despite increasing new orders, companies again reportedlower backlogs of work as they made efforts to completeprojects on time. This was achieved through increasesin both employment and purchasing activity. Stocksof purchases also rose, with some firms accumulatinginventories ahead of new work in coming months.

Overall input costs increased, with higher purchaseprices, staff costs and utility bills all mentioned. Inresponse to higher cost burdens, companies raisedtheir output prices, as has been the case throughout the43-month survey to-date.

Companies remained confident regarding the 12-monthoutlook for business activity, with four-fifths of respondentspredicting a rise over the coming year.

 “Looking ahead, keyevents such as the timing of the Final Investment Decision(FID) on oil will be key for growth in addition to how theweather outlook impacts the agrarian sector which has beenrelatively subdued for the most part of 2019,”Jibran added.

The headline figure derived from the survey is thePurchasing Managers’ Index™ (PMI™) which providesan early indication of operating conditions in Uganda.

About PMI

The PMI is a composite index, calculated as a weightedaverage 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 businessconditions on the previous month, while readings below50.0 show a deterioration.

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