Private Sector Output Rises Further in April Amid Upturn in New Orders

Private sector operating conditions during April remained encouraging as the headline Stanbic Purchasing Managers’ Index (Stanbic PMI) rose to 55.3, up from the 52.9 recorded for March.

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.

According to the latest survey, the overall upturn stemmed from further expansions in activity and new orders. Respondents highlighted a strong sales environment.

Furthermore, output expectations for the year ahead were upbeat, with firms hiring additional workers and expanding input buying to support greater new order inflows. Increased employment helped sustain backlog depletion.

Christopher Legilisho, Economist at Stanbic Bank said, “April data for the Stanbic PMI was strong, implying a vibrant private sector which is more and more optimistic about current and future consumer demand.”

“Private sector business conditions expanded for a third consecutive month due to strong, sustained customer demand resulting from further marketing campaigns driving both new orders and output. The uptick in output was across all sectors, with new clients being gained and consumer purchasing power improving. Firms ramped up employment as well as purchasing activity and inventories to meet strong demand. Consequently, backlogs declined in April as capacity increased.”

The Stanbic PMI is compiled by S& P Global from responses to questionnaires sent to about 400 purchasing managers.

The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services.

The Stanbic 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%).

Meanwhile, greater purchase and staff costs pushed overall input prices up during April. Companies sought to pass on higher input prices to customers, as output charges increased again.

“However, input and output prices increased due to elevated utilities bills as well as higher purchase costs due to price hikes for a selection of items. Staffing costs increased too because of more employees to cater for the workload,” Legilisho said.

April data signaled another monthly expansion in new business at Ugandan firms, as has been the case since February. Panelists stated that successful marketing campaigns supported new client wins and led the rise in new sales.

At the sector level, growth in activity and new business was broad based.

In line with the trend for greater output levels, Ugandan businesses created additional jobs for the third month running in April. The hiring of extra staff helped support output requirements, with backlogs of work falling for the fourth successive month.

Companies were buoyed by increased new orders, as purchasing activity was also expanded. The latest rise in input buying was in part due to efforts to build safety stocks, with inventories accumulated for the second month running.

Nonetheless, pressure on supplier capacity re-emerged, as delivery times lengthened for the first time in 17 months in April.

At the same time, increased purchase and staff costs drove another uptick in total input prices at the start of the second quarter. Higher utility and material costs, alongside greater wage bills, underpinned the rise, according to panellists.

Firms were largely able to pass through higher costs to customers, however as output charges increased further. Going forward, many business owners remain confident of a rise in activity over the coming year. Optimism was attributed to hopes of stronger client demand and planned investment in advertising.

According to the latest survey, the overall upturn stemmed from further expansions in activity and new orders. Respondents highlighted a strong sales environment.