Slow inflation reduction for manufacturing sector
A man makes an energy saving stove. PHOTO BY STEPHEN OTAGE
What you need to know:
Trend. The manufacturing sector, is picking up from the post-2011 economic challenges that saw the sector’s growth contract to 0.3 per cent in 2011/12.
Kampala
Increases in factory-gate prices for processed coffee, fish and milk have slowed down the pace at which inflation is reducing in the manufacturing sector, the Uganda Bureau of Statistics (Ubos) has said.
The Producer Price Index for Manufacturing (PPI-M) released yesterday show that the rate at which inflation declined on an annual basis for the period ending June 2013 reduced to 2.1 per cent from 2.3 per cent in May.
Presenting the PPI-M figures in Kampala, Mr William Anguyo, the principal statistician, Business Industry Statistics, Ubos attributed the increase in prices of processed coffee and fish to a rise in the exchange rate while processed milk prices were hinged to the long dry spell which reduced supply to factories.
According to Mr Anguyo, factory gate prices—which measure the price of goods charged for by manufacturers, excluding transport costs— for processed coffee increased by 4.5 per cent, 5.5 per cent for processed fish and 12 per cent for milk, slowing the rate of price decrease from 2.3 per cent in May to 2.1 per cent in June.
The other factor that slowed down the rate of inflation decrease was increases in prices of soap and chemical products mainly driven by the high import bill, attributed to a rise in the exchange rate. The dollar was quoted at Shs2,593 in June, up from Shs2,578 in April. However, price decreases were recorded for vegetable oil and fats due to metal products and bricks and cement due to competition in the market that forced players to lower prices to attract customers.
Impact
This means that while Ugandans paid relatively higher prices for some manufactured goods like processed milk, fish and coffee, they also enjoyed relatively lower prices for goods like vegetable oil, cement and bricks, among others, during the month compared to the month before.
The general picture in the manufacturing sector, however, points to the fact that it is picking up from the post 2011 economic challenges that saw the sector growth contract to 0.3 per cent in the 2011/12 financial year. Mr Lawrence Michael Oketcho, the policy and advocacy manager at Uganda Manufacturers Association said the sector is recovering, rather at a slow pace due infrastructural bottlenecks, high interest rates and high power tariffs.
The manufacturing sector posted the slowest growth rate last financial year, at 4.2 per cent, compared to the construction sector that grew by 8.2 per cent, according to the budget speech. In June last year, inflation in the sector stood at 10.6 per cent, according to figures from the Uganda Bureau of Statistics.
