Business activity shrinks at fastest rate on record in April

Business activity in Uganda’s private sector shrunk at the fastest pace on record in April, according to a survey, playing up the economic impact of the lockdown instituted to check the spread of the coronavirus and the global Covid-19 pandemic.

The Stanbic Bank Uganda purchasing managers’ index (PMI) came in at 21.6 in April, an all-time low, down from the 45.3 registered in March . A PMI reading above 50.0 indicates an expansion in business activity in the private sector while a reading below signifies contraction.

Company closures following the lockdown instituted in late March, and extended this month, to control the spread of the coronavirus led to a drop in output, while travel restrictions saw delivery times for inputs go up, the survey showed.

All the five sectors covered by the survey reported a decline in business activity, said IHS Markit, which compiles the survey. Demand was down across a majority of the 400 surveyed companies, as were new orders.

In addition, purchasing executives were pessimistic about future business performance for the first time in the survey’s history, with most of them concerned about the pandemic’s lasting impacts on economic activity.

“The biggest uncertainty facing private sector firms is the fact that planning has become awfully difficult, especially when you don’t know how long the Covid-19 pandemic will last,” said Jibran Qureishi, regional economist at Stanbic Bank East Africa.

Businesses reduced employee numbers and cut down on hiring, while their purchasing activity also fell.

The decline in purchasing activity and staff costs saw a reduction in production costs for the first time in the survey’s history, which in turn led to the first recorded slump in output prices, although a lack of demand also played a role.

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