Employment is rising again amid positive outlook for the coming year – theinsider.ug

Uganda’s private sector saw steady growth in new orders, which continued into a fourth month in late July, marking the start of the third quarter. The recovery was broad-based across all five sectors monitored, with companies combining expansion with new business acquisition.

The headline Stanbic Purchasing Managers’ Index (PMI), which tracks private sector operating conditions in Uganda, rebounded to 53.7 in July from a decline of 51.9 in June after a peak of 54.1 in May. Readings above the 50.0 threshold indicate a generally positive outlook.

Christopher Legilisho, Economist at Stanbic Bank, said: “The July PMI revealed a solid performance from the private sector economy. For the fourth consecutive month, surveyed firms reported strong production and new orders, linked to strong customer demand conditions across all sectors of the economy in July, with firms optimistic about customer demand conditions continuing into the next 12 months. Firms have therefore increased hiring, input purchases and raw material stocks to cope with the increased workload resulting from higher production and new customer orders.”

The latest survey also noted optimism in the outlook for production in the coming year, as companies again added staff in line with optimistic growth forecasts and higher new sales. At the same time, material purchases increased due to efforts to build up material inventories. Shorter lead times for materials helped such efforts. However, overall material prices rose again after increases in both personnel and purchasing costs. Selling prices also rose.

The Stanbic PMI is compiled by S&P Global based on responses to monthly questionnaires sent to purchasing managers. Sectors covered include agriculture, mining, manufacturing, construction, wholesale trade, retail trade and services.

The PMI is a weighted average of the following five indicators: new orders (30%), production (25%), employment (20%), supplier delivery times (15%) and purchased goods inventories (10%).

Legilisho said: “Significantly, total input prices, purchase prices and output prices rose in July, driven by pressure on wages, as well as higher raw material, utility and rental costs. Only the agricultural sector saw a decline in overall prices across the board, while the industrial sector saw a decline in labour costs. The official inflation figure of 4% y/y in July, up from 3.9% y/y in June, represents only a slight increase in inflationary pressures passed on to consumers.”

The overall recovery was aided by another monthly increase in production by Ugandan businesses in July. Increased business activity was supported by an increase in new orders and stronger customer demand. Among the five sectors monitored, production growth was broad-based.

Similarly, new orders rose for the fourth consecutive month at the start of the third quarter.

There was a recovery in all five monitored sectors, with companies combining expansion with acquiring new customers.

Meanwhile, July data showed further cost pressures as input prices rose again. Both purchasing and staff costs rose, with firms highlighting higher food, utilities, rent and timber prices, as well as rising wage bills.

That said, at a sector level, only construction and services saw their purchasing costs rise. At the same time, industry was the only sector to see a decline in its wage bill.

The increase in employee costs was due to the recruitment of additional, temporary workers to support the processing of new incoming orders in July. Employment increased for the 16th consecutive month, and the backlog of work decreased each month in 2024, as companies noted sufficient capacity to process incomplete orders.

Firms were confident of rising production in the coming year in July as hopes of a continuing favorable sales environment supported optimism. Firms across the five sectors monitored expressed a positive outlook on their expectations (on average).

Despite higher purchasing costs, companies increased input purchases in July as pre-production inventories also rose amid efforts to stockpile materials. An eighth consecutive monthly improvement in supplier delivery times helped companies build safety stocks.