The Ugandan economy registered faster growth in the financial year ending 2018 compared to the previous year, according to the latest Stanbic Bank Purchase Managers Index (PMI) for June.
At 53.2, slightly down from 53.9 in May 2018, the headline PMI pointes to healthy Ugandan private sector which continues to grow steadily.
Releasing the June’s survey findings, Jibran Qureishi, Regional Economist E.A at Stanbic Bank said, “The PMI has averaged 53.0 in the second quarter this year from 52.1 in the first, indicating that the underlying trend is on the upward trajectory. Moreover, the recently announced F2018/19 budget which was expansionary in nature, suggests that government plans to invest in oil related infrastructure projects over the next couple years. This should help support GDP growth, especially if local content laws are respected to ensure inclusivity. However cost pressures for firms are likely to rise over the coming months owing to the lag impact of the weaker exchange rate in addition to higher international oil prices.”
Speaking about the underlying reasons behind possible cost increases, Mr Benoni Okwenje, the Fixed Income Manager at Stanbic Bank said, ‘‘Cost pressures are mainly driven by the performance of the Uganda shilling. The currency has come under pressure in the past few months as a result of a combination of domestic factors, a weak balance of payments position and the global strengthening of the dollar. This is unlikely to be countered by exports in the short term with Uganda’s export markets contracting significantly.”
The June survey revealed that output growth contributed to the overall improvement in business performance, with firms citing stronger demand and promotional activities. “New orders also increased in June, as the customer pool grew. Moreover, both output and new orders rose across all five sub-sectors monitored by the survey,” the report reads in part.
Furthermore, workforce numbers continued to rise in the Ugandan private sector as firms responded to greater production requirements. Staffing levels increased across four out of the five categories, the exception being agriculture.
Meanwhile on the price front, widespread increases in cost burdens were recorded in the Ugandan private sector. Survey evidence suggested that expanding purchase prices contributed to the overall rise, underpinned by higher fuel costs and raw material prices. Staff costs also underpinned rising overall costs.
Firms continued to pass on higher input prices, with output charges increasing for the twenty-fifth month in succession. Moreover, survey data signalled that average selling prices rose across all sub-sectors monitored by the survey.