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Business environment registers historic post-Covid-19 improvements
Although business growth has been subdued for the better half of 2024, it has slowly registered growth as the year closes. Photo / File
What you need to know:
- The improvement in the business environment has seen the Purchase Managers' Index return to pre-Covid-19 growth, rising to 55.7 from 52.9 in October
Business prospects hit a historic high – post-Covid-19 – in November building on the momentum, in which businesses have recorded an improvement in the health of the private sector for eight months now due to strong and sustained customer demand.
The improvement, the Stanbic Managers Purchasing Index, which interviews business executives and purchasing managers on business performance, resulted from expansion in output and new orders, with demand conditions strengthening in November.
However, the Index reported an increase in operational costs, which forced businesses to raise selling prices for the third month since September.
Mr Christopher Legilisho, a Stanbic Bank economist, said November was vibrant with the private sector growing in optimism about both current and future economic conditions, which saw the purchasing managers’ index rise to 55.7 from 52.9 in October.
“This was an expansion in business conditions for the eighth consecutive month due to strong, sustained customer demand resulting in an expansion in output and new orders,” he said, noting that the uptick was broad-based, reflecting the acquisition of new clients and an improvement in consumer purchasing power.
However, the Index recorded a drop in employment levels across all surveyed sectors, implying that firms targeted cost containment amid reduced work backlogs, while input and output price pressures increased due to high utility and energy bills.
On the other hand, purchase prices rose due to higher costs for construction materials, food, and toiletries, but businesses remain positive about the economic outlook due to planned investment and expectations of strong consumer demand.
Businesses registered confidence in the outlook for the coming year due to planned investment in facilities and advertising.
The purchase managers’ index indicates that suppliers' delivery times recorded a further improvement with businesses recording shorter lead times due to competition among vendors to win sales. During November, Stanbic also recorded a nine-month consecutive expansion in pre-production inventories due to an anticipated rise in demand.
The private sector also continued to record increases in total input costs, which have expanded in almost three-and-half months, in addition to an increase in purchase prices, which extended the current sequence to more than two years.
Businesses also registered a ninth successive monthly increase in staff costs due to higher wage bills reportedly stemming from overtime payments and bonuses.
Average selling prices set by Ugandan private sector firms increased for a third month running in November. Companies noted that higher output charges reflected greater costs which were passed through to customers. All five monitored sectors recorded a rise in output prices, except construction where charges were unchanged on the month.
