By Prossy Namiiro
The Stanbic Headline Purchasing Managers’ Index (PMI) dropped to 50.9 in June, from 51.5 in May on account of further deterioration of business conditions in the Ugandan private sector.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
David Kamugisha, the head of trading, global markets at Stanbic Bank said the end of the second quarter saw a further improvement in business conditions in the Ugandan private sector, with output, new orders and purchasing all continuing to rise.
However, he said employment decreased, while ongoing inflationary pressures featured prominently in the latest survey.
Respondents to the June survey mentioned that price pressures had led new business to wane. In both cases, construction bucked the wider trend and posted declines.
Ferishka Bharuth, economist Africa regions said firms responded to higher new orders by raising purchasing activity, with inventories also up.
“On the other hand, employment decreased, thereby ending a five-month sequence of job creation,”
Meanwhile, suppliers continued to speed up deliveries, with lead times shortening for the eleventh month running in June. The survey also noted a persistent increase in input costs with higher prices for electricity, fuel, and water all widely mentioned by respondents.
Purchase costs were driven higher by rises in price for a range of items such as cement, food products and stationery, while firms also increased staff pay in response to higher living costs—with input prices up, companies also increased their selling prices.
Charges were up across all five broad sectors covered.
Looking ahead, around 72% of respondents expressed optimism about the second half of the year on account of expected increases in customer numbers and improving demand.
The PMI is a composite index, calculated as a weighted average of five individual sub-components including; New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%).
PMI, which is sponsored by Stanbic Bank and produced by S&P Global, has been conducted since June 2016 and covers the agriculture, industry, construction, wholesale and retail and service sectors.