Uganda Sees weak Demand Recovery as Layoffs Continue
While the recent relaxing of the Covid-19 lockdown has to some extent improved economic activities, demand remained low in August, according to the headline Stanbic Purchasing Managers’ Index (PMI).
The PMI survey shows that companies continued to lower their staffing levels, purchasing activity and inventory holdings during the month.
“There was little sign of capacity coming under pressure as backlogs of work fell again,” it shows.
But experts predict that demand will grow this month and this will subsequently drive the recovery of the employment sub-index.
Of all sectors, the construction sector might remain in contraction territory, according to the PMI report.
Output prices decreased for the third month running, although some companies raised charges in line with higher input costs, others lowered selling prices as demand remained relatively soft.
The lifting of the lockdown is expected to lead to further growth in business activity over the coming year with more than 80% of respondents optimistic in the year ahead outlook.
August also saw an overall rise in input prices following a reduction noted in July.
This trend matched the picture seen for purchase costs where product shortages led to higher prices for a range of materials.
But staff costs continued to fall. Meanwhile, the PMI moved back above the 50.0 mark in August, posting 50.2 from 34.6 in July.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
Ronald Muyanja, the Head of Trading at Stanbic Bank Uganda said, “a return to growth in output and new orders recorded in August gives hope that as lockdown restrictions are eased further, that will spur growth in business activity in the coming months.”
However, Muyanja calls for ‘cautious optimism’ noting that despite the growth seen in August, the PMI reading is still below the series’ average as businesses remain reluctant to raise staffing levels or input purchases.
“Notably, the employment sub-index is yet to recover,” Muyanja said.
Sponsored by Stanbic Bank, the monthly PMI survey, involving some 400 respondents, is produced by IHS Markit and has been conducted since June 2016.
It covers the agriculture, industry, construction, wholesale/retail, and services sectors.
The headline figure derived from the survey is the Purchasing Managers’ Index (PMI) which provides an indication of operating conditions in Uganda.
It 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%).
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