Private sector activity falls to 5-month low on coronavirus supply disruptions

Uganda’s private sector expanded at its slowest pace in five months in February as the coronavirus outbreak affected the supply of goods from China, according to a survey of purchasing managers’ activity released on Wednesday.

The Stanbic Bank Uganda Purchasing Managers’ Index (PMI), a monthly survey of business conditions in Uganda’s private sector, fell to 56.2 in February, the lowest since September last year, from an all-time high of 58.8 in January, IHS Markit said.

Readings above 50 indicate an expansion in activity, while readings below signify contraction.

Although business activity expanded across all sectors in February, driven by improving customer demand, higher input costs and the resultant prices of output weighed on the private sector purchasing managers’ index.

“Higher input costs were recorded in February, with rising prices for crops, electricity, water, and products from China all mentioned,” IHS Markit said. It added that the coronavirus outbreak in China “affected the supply of some goods” from that country, while prices of output also continued to rise.

“The coronavirus outbreak remains the most notable downside risk to economic growth over the next six months,” said Jibran Qureishi, regional economist for East Africa at Stanbic Bank’s global markets unit.

“Not only could output prices rise due to importing raw materials and other finished goods from more expensive alternatives other than China, but general trade could also ease due to this outbreak. Of course, depending on how long it lasts, tourism arrivals may also reduce,” Mr Qureishi said.

The increase in customer numbers led to a further improvement in new orders for the 37th consecutive month, IHS Markit said. Employment also rose as businesses increased staffing levels to keep on top of workloads.

The report said business managers are confident private sector output will rise over the next 12 months, supported by business expansions plans, greater marketing, and expectations of further growth in new orders.

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