Private Sector Activity Remains Robust Amid Increased Demand – Stanbic Index


Stanbic Bank's Fixed Income Manager, Benoni Okwenje.
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The Stanbic Purchase Managers Index (PMI) for September shows that private sector activity remained in growth territory at the end of the third quarter of the year.

The survey, sponsored by Stanbic Bank and produced by IHS Markit, indicates that ability of firms to secure additional customers resulted in higher new orders and a subsequent expansion of business activity. Meanwhile, both input costs and output prices continued to increase.

The headline PMI was 55.7 in September, down from 57.5 in August, but still above the 50.0 no-change mark.

Stanbic Bank Fixed Income Manager Benoni Okwenje, commented: “Private sector activity remains solid at the end of the third quarter of 2019. Despite the PMI declining to 55.7 in September from 57.5 in August, overall activity remains robust”.

“Domestic demand continues to improve, partially driven by private sector credit growth over the last year. Despite higher input costs, the rise in new orders has supported overall output. It has now been 32 months in a row of improving business conditions and we suspect this trend will carry through for the rest of the year.”

The report shows that new orders increased in September, with a number of panellists indicating that they had been able to secure new customers during the month.

The survey, which has been conducted since June 2016 and covers the agriculture, industry, construction, wholesale and retail and service sectors, contains the latest analysis of data collected from the monthly survey of business conditions in the Ugandan private sector.

According to the PMI report for September, the expansion in demand, alongside successful marketing, led to a thirty-second successive monthly rise in business activity. All five broad sectors saw growth of output.

“Purchasing activity continued to rise, extending the current sequence of expansion to 19 months. Faster suppliers’ delivery times meant that the increase in input buying fed through to an accumulation of inventories. Overall input prices increased, with panellists reporting higher costs for electricity and purchased items including cement, food products and stationery,” Okwenje added.

Companies responded to higher input costs by raising their output prices accordingly. Selling prices have increased throughout the 40-month survey so far.

The PMI report further states that the likelihood of continued new order growth and business expansion plans led to optimism among firms that output will rise over the coming year. “Over 74% of panellists were confident regarding the outlook,” the report showed in part.

The 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.

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

 

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