Business activity in Uganda dropped for the first time in seven months in January due to the election period, with companies experiencing a slump in new orders and a decline in activity for some, according to a key survey.
The Stanbic Bank Uganda purchasing managers’ index for the private sector, which measures business conditions, declined to 49.8 in January compared with 51.2 in December.
The index, based on survey data collected from January 12-28, during the height of general elections, was the lowest since June last year . A PMI reading above 50 indicates an increase in business activity from the previous month while a reading below 50 shows a contraction.
IHS Markit, the international research firm that conducts the survey, said that declines in business activity were recorded in the construction, services, and wholesale and retail sectors. However, companies in the agriculture and industry sectors recorded growth.
The fall in business activity saw companies reduce their staffing levels and purchasing activity, IHS Markit said. Staff costs also fell.
Despite the decline in purchasing activity, private sector firms still reported an increase in purchase prices and, as a result, an rise in production costs. This was passed on to customers in the form of higher selling prices reversing the fall recorded in December.
Ferishka Bharuth, the economist for Africa Regions at Stanbic Bank said: “…as uncertainty around the election period dissipates, economic activity and business conditions should also recover.”
New export orders, which also declined in January for the fifth consecutive month, are expected to start recovering “as vaccinations [for Covid-19] are rolled out in Uganda’s key export markets”, added Ms Bharuth.
