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The seasonally adjusted Purchasing Managers Index (PMI) for Uganda has signalled further improvement in the health of the private sector, between July and August.

The headline index posted above the 50.0 no-change mark for the seventh month running, supported by improvements in new orders, output, employment and stocks of purchases , and the PMI reading for August was above the average recorded over 15 months of data collection so far.

Following stability in the preceding month, the wholesale and retail sector returned to growth in August.

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Improvements in business conditions across the remaining sectors of agriculture, construction, industry and services, were maintained in the latest survey period.

Uganda’s private sector registered increases in both output and new orders for the seventh consecutive month during August, and panelists noted the greater customer purchasing power and further improvements in demand that were complemented by promotional activities.

Meanwhile, new export orders fell during August, with panelists mentioning political instability in key export markets like South Sudan.

In response to greater output requirements, private sector firms raised their payroll numbers accordingly, with all five monitored sub-sectors increasing their staffing levels during August.

Also, the ongoing upturn in new orders prompted firms to engage in input buying. As a result, input stocks accumulated for the fifteenth month in succession. Firms raised inventories due to forecasts of further improvements in market demand, according to anecdotal evidence.

Commenting on August’s survey findings, Jibran Qureishi, Regional Economist EA at Stanbic Bank said: “The private sector continued to show encouraging signs of improvement in  August with the PMI average recorded over the past two months of 54.2 being much higher than the 51.6 average in the first two quarters of 2017. Indeed, even though export orders were down in August, firms are likely to begin exporting much more over the remainder of the year and beyond as political risk in key trading partners could begin to subside. Moreover, the current stable macroeconomic environment is likely to bode well for the Ugandan private sector in FY2017/18 and continue to moderately get the economy back on firm growth trajectory path. ”

Meanwhile, the Ugandan private sector firms faced higher cost pressures during August. Cost inflation was again recorded across all five sub-sectors monitored by the survey. According to underlying data, rising overall input prices reflected higher staff costs and purchasing prices, with some food items, taxation and fuel prices reportedly up since July. At the same time, firms passed on higher cost burdens by raising output prices.

The Stanbic Bank Uganda Purchasing Managers’ Index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in 400 private sector companies selected to accurately represent the true structure of the Ugandan economy, including agriculture, construction, industry, services and wholesale and retail.

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