Jibran Qureshi, Standard Banks regional economist for East Africa

Stanbic Bank has released its Purchase Managers Index (PMI) for September which indicates that there has been a slight decline in the headline index.

Announcing the results at a press briefing in Kampala Jibran Qureshi, Standard Banks regional economist for East Africa, noted however, that even  though  the  headline  PMI  fell  to  53.8  from 54.1 in  August,  the  average  of  54.1  in  the  three months  to  September  was  still  higher  than  the average of 51.6 in the first half of the year.

A strong performance  from  the  coffee  sector has supported growth but  the  recent armyworm infestation could still pose as a threat to food crops prices and agricultural  productivity  towards  the back  end  of the  year.  That  said,  a  gradual improvement  in private  sector  credit  growth should  bode  well  for domestic demand.

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The Ugandan private sector is being encouraged to increase its interest for credit in a bid to boost economic activity.

In the recent monetary policy statement for October, the Central Bank announced a further downward revision of the Central Bank Rate (CBR), the fifth in the past nine months. At just 9.5% the CBR now stands at its lowest level since the introduction of the CBR in 2011.

The BOU Governor Emmanuel Mutebile explained the reasons behind the rate cut. “Given that annual  core inflation is forecast to remain around the  medium term  target  of  5% and  economic  activity  is  slowly  gaining momentum,  a  cautious  easing  of  monetary  policy  is  warranted  to  boost private  sector  credit  growth  and  to  strengthen  economic growth,” he said.

Analysing the performance of the various business sectors Stanbic monitors to conduct the PMI research, Jibran revealed, that agricultural, industry, services and wholesale and retail sectors  continued  to  register  growth  of  output  and  new business  inflows  in  September. Meanwhile, construction output decreased as the sector saw no change in new orders. Overall input costs however rose across each sector, he said.

Looking at employment where workforce numbers increased on the back of new projects and heightened demand, Jibran noted Overall job creation is a trend we have witnessed since the inception of the survey 16 months ago.

He noted that bigger new orders had also led Ugandan private sector firms to increase their quantities of purchases for the fourth month running.

Inventories grew as a consequence. Meanwhile, firms  were  able  to  work  through  their backlogs of  work,  with  the  latest  decline  in  outstanding business the sixteenth in as many months.

The Stanbic PMI is a composite index, calculated as a weighted average of five individual sub-components: 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.