Business conditions in the private sector soften in August

Uganda’s private sector activity declined to a three-month low in August, a business survey showed on Wednesday, although it was still above the average since the survey started in January 2016.

The Stanbic Bank Uganda purchasing managers’ index fell to 57.5 in August from 58.2 in July, which still indicates an improvement in private sector business conditions as a reading of 50 or above signals expansion.

August also rounded off the strongest quarter of business activity, with an average reading of 57.7, in the survey’s 44-month history. “The latest PMI reading continues to anchor our view that domestic demand in Uganda has been performing well,” said Stanbic Bank’s regional ecomist for East Africa, Jibran Qureishi.

“In fact, despite the likelihood that the Final Investment Decision on commercial oil production could be postponed into 2020 , we doubt that economic growth will suffer just because of this postponement.”

“The ongoing public investment in infrastructure, in addition to strong domestic demand driven by the private sector will probably continue to keep GDP growth on a multi-year basis above the 6.0% level,” Mr Qureishi added.

Customer demand continued strengthening in the month, leading to an increase in output, new orders, and employment. Surveyed managers said they were confident business activity will continue rising over the next year because of further improvements in customer demand and business expansion plans, said IHS Markit, which conducts the survey.

Of the five sectors covered in the survey, only construction did not record a rise in employment and was also the only sector that reported a decrease in staff costs.

Input prices continued increasing, driven by higher staff costs, purchase price rises, and increases in electricity, fuel, and water costs. As a result, companies raised the prices of their final goods and services although some respondents said they were compelled by competitive pressures to offer discounts.

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