Stanbic reports improvement in business output, new orders 

The Stanbic survey indicates that there was an improvement in output and new orders during August. Photo | file 

What you need to know:

This is the first time in over three months the survey has reported positive movement after business activity was dampened by a surge in inflation resulting from an increase in commodity prices such as food and fuel. 

Respondents, among them business chief executives and purchasing managers reported a slight improvement in business conditions in August, according to a survey conducted by Stanbic Bank. 

The survey conducted under the Stanbic Purchasing Managers’ Index, pointed to a renewed improvement in business activity, especially in the private sector, noting growth in both output and new orders. 

This is the first time in over three months the survey has reported positive movement after business activity was dampened by a surge in inflation resulting from an increase in commodity prices such as food and fuel. 

During August, the survey indicated, business conditions recovered to a score of 50.5, which was more than two points above the 48.2 that was scored in July. 

The survey also returned a score above the 50 point mark, above which it is an indication of improvement in the health of the private sector, while a score below signals negative growth.

However, the reading was still below the 52.5 point average, which is an indication that businesses are still struggling to shake off shocks resulting from inflation and a rapid surge in inputs. 

Speaking during the release of survey findings in Kampala on Tuesday,  Mr Ronald Muyanja, the Stanbic head of trading, said there has been renewed expansions in both output and new orders with some firms reporting that they had been able to secure new customers over the month. 

This, he said, fed through to rising activity, although there were still some reports of demand remaining muted. 

The survey also noted that four of the five monitored sectors saw output increase, supported by a rise in purchasing activity while suppliers’ delivery times lengthened for a second successive month due to poor transport conditions, material shortages and high cost of transport. 

Mr Mulalo Madula, an economist at Standard Bank, indicated that apart from the services sector, output growth was broad-based, with agriculture, industry, construction, wholesale and retail increasing output. 

New orders increased in agriculture, industry, and wholesale and retail, but decreased in construction and services.

However, Mr Madula indicated that during the period, new export orders fell for the forth months but noted that businesses remain confident they will increase in the next 12 months. 

Overall, the survey results indicated that input prices continued to rise, often linked to higher fuel and transportation costs, but also reflecting increases in the price for items such as cement, sand and food. 

However, the survey noted that approximately 72 percent of respondents predicted an increase in output. 

Staffing and employment       

The survey also found that during the period, staff costs decreased for the second month running with some companies reporting that cost considerations had forced them to reduce employment for the third consecutive month.
 
Staff reductions were mostly reported in agriculture, industry and wholesale and retail, while construction and services posted increases 

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