Stanbic PMI indicates poor demand in March. Uganda’s private sector enterprises saw a downturn in economic conditions in March, marking the end of a 16-month increasing trend.
Customer demand was apparently impeded by lower purchasing power and less money in circulation, leading to a fall in both output and new orders.
Nonetheless, companies were hopeful that commercial activity would rise in the coming months, with employment and input purchases increasing further. Although lead times for inputs improved, increased demand for commodities and employment led to higher total costs. At the same time, enterprises increased their selling prices.
According to Christopher Legilisho, a senior economist at Stanbic Bank, the headline PMI decreased to 49.3 in March, down from 51.7 in February, indicating a decline in the health of Uganda’s private sector at the end of Q1. The decline in business conditions was the first since July 2022.
“The stretch of high activity in Uganda’s private sector ended in March. Output and new orders fell as the money supply tightened, reducing consumer demand. Only the industrial sector had increased.
Nonetheless, Ugandan enterprises boosted their workforce numbers for the eleventh consecutive month, notably in agriculture and services. However, construction and industry lost employment in March. Backlogs reduced significantly in March, as fewer orders allowed enterprises to complete outstanding work.” Legilisho said.
Legilisho adds that Ugandan private sector enterprises are optimistic about the outlook for the next year. Confidence in future business activity was widespread across sectors.
“Purchasing activity in Ugandan private sector firms increased again in March, extending the current trend of growth that began in November 2022.”Panelists connected increased input purchases to expected growth in new orders in the coming months,” he said, adding that companies in March remained optimistic about the prospects for client demand and output over the next year.
Despite a slowing sales environment, Ugandan businesses raised selling prices again, attempting to pass on additional expenses to customers.
Output charges increased for the 12th consecutive month, placing the employment Uganda’s private sector enterprises expanded their workforce in March, continuing the year-long job growth trend.
The research delves deeper into the five tracked industries, highlighting how agriculture and services witnessed an increase in employment. Construction and industry workforce levels decreased, but wholesale and retail headcounts were steady for the month.
Backlogs of work at Ugandan businesses fell considerably at the end of the first quarter. Since data collection began in June 2016, outstanding business levels have consistently decreased, except in December 2023. Over a quarter (27%) of survey respondents reported a depletion, as decreased new order inflows allowed businesses to clear their backlogs.
According to the survey, anecdotal evidence indicated that higher operational expenditures were caused by higher raw material, rent, and fuel prices, as well as increases in power and water bills. Increased input costs were widespread across sectors. The average cost burden encountered by Ugandan enterprises increased further in March, with input prices rising in consecutive months since August 2021.
Ugandan private sector enterprises boosted their selling prices in March to reflect rising total costs. Companies apparently try to pass on higher expenses to customers. Three of the five examined sectors (industrial, wholesale/retail, and services) had higher production charges.
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