Stanbic Bank PMI: Demand grows, economy on the bounce

December 2021 saw further increases in output and new orders in the Ugandan private sector as demand continued to improve, according to Stanbic’s Purchasing Managers’ Index (PMI).

However, the index shows, employment decreased following a rise in November and that price pressures were evident again.

As a result, the headline PMI fell to 51.5 in December, down from 54.1 in November.

Although pointing to a fifth successive improvement in business conditions in the private sector, the latest PMI figure was below the average since the series began in June 2016.

The head of Trading at Stanbic Bank Uganda, Ronald Muyanja said rising customer numbers amid improving demand resulted in increases in both output and new orders during December, in each case for the fifth month running.

According to the index, activity expanded in the agriculture, services and wholesale & retail sectors, but declined in construction and industry.

In turn, firms expanded their purchasing activity again, feeding through to another rise in stocks of inputs. Firms were aided in their efforts to build inventories by shorter delivery times from suppliers.

But employment dropped in December after having risen for the first time in six months during November; some firms indicated that they had reduced staffing levels in order to limit costs.

Away from labour expenses, however, costs continued to rise, and respondents linked higher input prices to a range of factors, most notably increases in costs for cement, electricity, food, fuel and stationery.

A positive demand environment enabled companies to pass on higher input costs to customers, resulting in a fifth consecutive monthly increase in selling prices.

The prospect of further improvements in new orders supported confidence among 83% of the respondents, which business activity will expand over the course of 2022.