Stanbic PMI: Higher customer demand raises PMI to 54.8 in December

Greater customer numbers during December fed through to higher new orders and business activity as the headline monthly Stanbic Purchasing Managers Index (PMI) rose to 54.8 from 53.4 in November.

This was the highest reading since June 2023 and above the 50.0 no-change mark for the fourteenth consecutive month.

Christopher Legilisho, Economist at Stanbic Bank said, “Uganda recorded solid PMIs for December, a continuing trend of robust growth in private-sector activity, with both output and new orders rising for a seventeenth consecutive month due to greater customer demand.”

“Hiring increased for the ninth month in a row, with firms employing staff on both a permanent and temporary basis to handle increasing orders and purchasing activity as well as to address backlogs concentrated in the agriculture sector. Of the surveyed sectors, industry bucked the trend posting a reduction in employment,” he said.

According to the December survey, companies expanded employment and purchasing activity, but this capacity enhancement was not sufficient to prevent a first increase in backlogs of work on record. Meanwhile, input costs and selling prices continued to rise.

The Stanbic PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers. The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services.

The 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%).

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

For the first time in three months, all five broad sectors posted an increase in output as the wholesale and retail category returned to growth.

Legilisho said, “Firms are optimistic on the outlook for customer demand and output over the next 12 months. Indeed, Ugandan firms increased inventories and quantities purchased in line with robust customer demand.”

Despite the expansions in employment and purchasing activity, companies recorded a rise in backlogs of work in December, the first time this has been the case since the survey began. That said, the rise in outstanding business was limited to the agriculture sector.

Meanwhile, suppliers were able to speed up their deliveries in spite of rising demand for inputs, thereby ending a four-month sequence of lengthening lead times.

Overall input prices rose amid higher costs for purchases and staff alongside increased bills for electricity and water. Particular items that were up in price at the end of the year included cement, fuel and sugar.

With input costs rising, companies increased their output prices accordingly, extending the current sequence of inflation to nine months.

Companies remained optimistic in the 12-month outlook for business activity, with confidence fuelled by expectations that customer numbers will rise further throughout 2024. Close to 83% of respondents predicted an expansion in output, with less than 1% of firms pessimistic.

Confidence in the outlook reflected predictions of further improvements in customer numbers. Positive sentiment was signaled across all five monitored sectors.