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Sustained growth in private sector output marks end of 2024

Watchdog Uganda by Watchdog Uganda
8 months ago
in Business, Finance
1 0
Christopher Legilisho, Economist at Stanbic Bank

Christopher Legilisho, Economist at Stanbic Bank

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Kampala, January 07, 2025: The monthly Stanbic Purchasing Managers’ Index (PMI), which provides a measure of prevailing private sector outlook, dropped to 53.1 during December compared to the 55.7 reading posted in November.

Christopher Legilisho, Economist at Stanbic Bank said, “Stanbic Bank Uganda PMI data for December reveals sustained strong private sector growth, with businesses budding in optimism about present and future economic conditions. Private sector business conditions expanded for the ninth consecutive month due to strong sustained customer demand resulting in an expansion in output and new orders despite a dip in employment for a second month in a row.”

He said, “The uptick in new order growth occurred across the board, reflecting the acquisition of new clients and an improvement in consumer purchasing power. Consequently, there was an increase in backlogs during the month. Firms ramped up their purchasing activity and inventories to accommodate for strong demand.”

The Stanbic PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers of around 400 local private sector companies. The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services.

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a negative outlook. The PMI is a weighted average of the following five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%).

Central to the latest strengthening in the health of the private sector were further increases in both output and new orders in December, in each case extending the current periods of expansion to nine months.

Companies were reportedly successful in securing new customers, resulting in growth of new orders and feeding through to the expansion in output. Business activity increased across each of the five broad sectors covered by the survey.

Hopes are customer numbers will rise further over the course of 2025 which contributed to confidence in the year- ahead outlook for business activity, coupled with competitive pricing to support growth.

Legilisho said, “Input and output price pressures remained due to elevated utility bills, and increased purchase prices due to hikes to materials including timber, foodstuff and paper products. Staffing costs were muted as increases in wages were largely netted off by the fall in employment. Here, pressures have moderated when compared to increases seen throughout most of the last two years implying easing of monetary policy is plausible in the near term.”

Despite sustained growth of output and new orders and confidence for the future, companies scaled back employment for the second month running at the end of the year. The fall in staffing levels often reflected the non- replacement of leavers.

Industry bucked the wider trend and posted a rise in workforce numbers. A fall in employment at a time of new order growth meant that backlogs of work increased for the first time in four months.

In contrast to the picture for staffing levels, purchasing activity rose and companies expanded their stocks of inputs.

Efforts to secure inputs were helped by a shortening of suppliers’ delivery times as competition among vendors led them to deliver more quickly than in November. Higher prices for materials including foodstuff, paper products and timber fed through to a rise in purchase costs in December.

Meanwhile, staff costs were broadly stable. Improvements in customer demand meant that companies felt able to pass higher input costs on to clients in December. As a result, output prices increased for the fourth consecutive month. Charges rose in agriculture, industry and services, but fell in construction and wholesale & retail.


Do you have a story in your community or an opinion to share with us: Email us at editorial@watchdoguganda.com
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