Businesses record improvement in new orders

Man carries matooke in Nakasero Market near Radio One on November 30.  Photo | Gabriel Buule 

What you need to know:

  • Whereas the business environment continues to be  unstable companies have remained optimistic and expect an improvement in the remaining part of the year. 

A survey by Stanbic Bank indicates that the business environment improved in April, signaling a renewed upturn in the health of the private sector. 

The monthly survey, which interviews business executives and purchasing managers on the performance of the business environment, notes that the Stanbic Purchasing Managers’ Index improved to 52.6 in April, up from 49.3 in March, denoting an improvement and expansion in new orders in April. 
The survey further notes that demand conditions improved, with an increase in client referrals and new orders. 

Mr Christopher Legilisho, the Stanbic economist, said the renewed expansion reflected growth in output and new orders, as demand conditions strengthened amid a brief weakness in the previous survey period. 
“Greater new business stimulated increased purchasing activity and efforts to build inventories. At the same time, we note that businesses hired additional workers to reduce backlogs of work and pressure on capacity,” he said.

The pick-up in customer demand, Mr Legilisho said, had helped to drive output growth, as companies saw a renewal in business activity in April. 
However, agricultural-related businesses saw a decrease in output, but recorded an increases in staff and purchase costs, following higher raw material prices and salaries for new hires. 
The sector, thus, experienced an overall rise in input prices at the start of the second quarter, recording an increase in business expenses for 33 months. 

Across all sector, the survey recorded an overall increase in input prices, as purchase and staff costs rose simultaneously for the second month running, but an increase in new order inflows encouraged businesses to expand their staffing numbers in April. 

The survey also notes that the increase in employment was supported by confidence in the outlook for output over the coming year, with many respondents expressing optimism in the remaining part of the year. 
Stanbic also indicated that despite an increase in purchase prices, businesses stepped up their input buying, due to an increase in client demand and the need to build safety stocks to support expansion.