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Stanbic PMI indicates rise in business activity supported by employment growth

By George Mangula

The Stanbic Purchase Managers Index (PMI) for October indicates a general improvement in the business environment in Uganda.

The survey sponsored by Stanbic Bank and produced by IHS Markit, posted 56.3 in October, up slightly from 55.7 in September and above the series average. The headline PMI shows that Ugandan companies continued to secure greater volumes of new business in October, expanding production with the help of increased staffing levels in response.

The report which contains the latest analysis of data collected from the monthly survey of business conditions in the Ugandan private sector shows that purchasing activity increased for the twentieth successive month in October amid higher new orders, with inventories also expanding.

Growth of both output and new orders was recorded across each of the five broad sectors covered by the survey.

Benoni Okwenje, Stanbic Bank Uganda’s fixed income manager while commenting on the findings said new orders expanded for the thirty-third month running, with panellists linking the rise to increased customer numbers, marketing and competitive pricing.

“Companies responded to higher new orders by increasing their business activity, aided by a further expansion in staffing levels. The rise in employment helped firms keep on top of workloads, with backlogs of work declining again,” he explains.

Meanwhile, input costs rose again, leading to ongoing output price inflation.

Input costs increased in October, amid rises in purchase prices, staff costs and utility rates. According to respondents, inflation of purchase costs reflected higher prices for items including foodstuffs, cement, fuel and iron bars.

Okwenje explains that with input costs rising, companies in Uganda increased their output prices accordingly.

Some panellists reported that improving customer demand enabled them to raise their selling prices. Charge inflation was recorded in all monitored sectors, except for agriculture which saw no change in output prices.

According to the report findings, further improvements in demand are expected over the coming year, contributing to confidence among companies regarding the 12-month outlook for business activity.

Jibran Qureishi, Regional Economist E.A., Global Markets at Stanbic Bank commented: “The short rains seem to have started early this season which should thus bode well for agricultural productivity in H1:2020. In fact, we still expect the government continue investing in oil related infrastructure which will probably continue to anchor GDP growth to remain more or less around the 5.8-6.0 percent level over the coming year.

PMI provides an early indication of operating conditions in Uganda. The PMI is a composite index, calculated as a weighted average of five individual sub-components: New Orders (30 percent), Output (25 percent), Employment (20 percent), Suppliers’ Delivery Times (15 percent) and Stocks of Purchases (10 percent).

Stanbic Bank Uganda is a member of the Standard Bank Group, Africa’s largest bank by assets. Standard Bank Group reported total assets of R2.1 trillion ($148 billion) as at 31 December 2018, while its market capitalization was at R289 billion ($20 billion).

The group has direct, on-the-ground representation in 20 African countries. Standard Bank Group has 1,221 branches and 8,815 ATMs in Africa, making it one of the largest banking networks on the continent. It provides global connections backed by deep insights into the countries where it operates.

Stanbic Bank Uganda provides the full spectrum of financial services. Its Corporate & Investment Banking division serves a wide range of requirements for banking, finance, trading, investment, risk management and advisory services. Corporate & Investment Banking delivers this comprehensive range of products and services relating to: investment banking; global markets; and global transactional products and services.

Stanbic Bank Uganda personal and business banking unit offers banking and other financial services to individuals and small-to-medium enterprises. This unit serves the increasing need among Africa’s small business and individual customers for banking products that can meet their shifting expectations and growing wealth. 

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