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SURVEY: Companies lower staffing levels for 4th month­

But businesses remain optimistic about the future

Kampala, Uganda | JULIUS BUSINGE | Business sentiments in Uganda’s private sector remained positive but slow in September on account of new orders and higher output, according to the monthly Stanbic Bank Purchasing Managers Index (PMI).

The headline PMI registered 52.5 in September compared to the 50.2 in August; a weak gain although still above the 50.0 threshold for the third month running.

Nonetheless, the latest reading is slightly lower than the monthly average of 52.9 recorded since the survey first began in June 2016.

Ronald Muyanja, the Trading, Global Markets Head at Stanbic Bank Uganda said the Ugandan private sector was able to build on the return to growth seen during August at the end of the third quarter, registering a second consecutive gain in output and new orders.

“That said, employment and purchasing activity have continued to fall,” said Muyanja. New orders increased for the second consecutive month amid a loosening of lockdown restrictions feeding through to higher customer numbers and improving demand.

In turn, business activity also expanded in September after having returned to growth in August; four of the five broad sectors covered by the survey signalled increases in output, the exception being wholesale & retail.

Despite increases in output and new orders, companies lowered their staffing levels for the fourth successive month and continued to reduce their purchasing activity and inventory holdings.

In addition, while totally new business continued to recover following the loosening of lockdown restrictions, international demand struggled again at the end of the third quarter.

New export orders decreased for the thirteenth consecutive month. Overall, input prices rose on the back of higher purchase costs and increased utility charges. Where purchase prices rose, analysts linked this to a range of items, most notably cement, food products and stationery; wage costs continued to fall, however, in line with the reducing trend in staffing levels.

Construction was the only one of the five broad sectors covered to buck the wider trend and record a rise in workforce numbers. The passing on of higher overall input costs to customers resulted in a first increase in selling prices since May.

Going forward, company executives were confident in further output growth over the coming year amid expectations of improvements in customer numbers and new order volumes. Some 89% of respondents predicted a rise in activity over the next 12 months, with just 4% pessimistic, according to the survey. Optimism was widespread across the five broad sectors covered by the survey.

In terms of work backlog, as has been the case each month since the survey began in June 2016, this decreased in the Ugandan private sector during September.

Anecdotal evidence suggested that with new orders subdued during the recent lockdown, firms had been able to keep on top of workloads and make sure that all projects were completed on time.

Meanwhile, companies in Uganda lowered their purchasing activity during September, the fourth successive month in which this has been the case.

But the survey said, some panellists indicated that they had raised their purchasing activity in response to higher new orders.

A reduction in purchasing activity fed through to a depletion in inventories, the fourth in as many months.

There were some reports, however, of stocks being increased in line with improving demand.

Ugandan companies reported a further reduction in staff costs in September. This extended the current sequence of decline to four months, which mirrors that seen for staffing levels.

Wages and salaries decreased in each of the agriculture, construction, industry, services and wholesale and retail categories.

Economy remains weak

Prof. Emmanuel Tumusiime-Mutebile, the governor Bank of Uganda, had in the Monetary Policy Statement for August predicted a slow economic growth for September citing continued pandemic containment measures.

He said the Covid-19 restrictive measures that remains in place will continue to weigh on economic activity, with economic growth projected to be in the range of 3.5-4% in the FY 2021/22.

However, Mutebile said the economic growth is expected to rebound to 6-7% in the FY 2024/25, indicating that economic activity is expected to remain below the pre-pandemic levels for some time.

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