What you need to know:
- Even as there was an increase in employment, a number of companies maintained cautious hiring
The momentum in employment picked up in October as companies sought to recruit more staff to meet sustained growth in new orders, according to the Stanbic Bank Purchasing Managers’ Index.
The Index, which measures monthly performance of the economy based on interviews with company chief executives and purchasing managers, indicated that during October there was renewed increase in employment, ending a four-month sequence of decline.
However, Stanbic noted, a number of companies had maintained cautious hiring even as the Index returned an increase in staff costs for the second successive month since September.
During the period, Stanbic noted that while wages rose in agriculture, construction and industry, they fell in services, wholesale and retail.
Overall, the Stanbic Purchasing Managers’ Index, which was at the weekend, indicated that business conditions in the private sector remained unchanged, building on two months of improvement.
During October, the Index returned a 50 score, signaling a stable business environment even as the score remained below average.
Mr Mulalo Madula, the Standard Bank economist, said business activity remained stable in October, with the current wave of expansion extending to three months of increased output, new orders and a renewed increase in employment.
However, he said, despite an increase in new orders, reluctance to hold inventories underpinned the recent decline in both purchasing activity and inventories for the second month in a row.
“The economy could continue to face supply driven inflation pressures. Total input costs continued to rise in October, attributed to rising electricity, fuel and water prices, and staff costs. Firms that increased output charges associated this with higher input costs. Although the inflation outlook is highly uncertain, risks to the inflation outlook are to the upside,” he said.
Bank of Uganda recently raised its policy rate (Central Bank Rate) by one percentage point to 10 percent and cautioned that the outlook for inflation is highly uncertain as several risks lie ahead, pointing out that the balance of risks is still tilted upwards.
Last week, Uganda Bureau of Statistics indicated that inflation had slightly risen to 10.7 percent during October from 10 percent, due to an increase in prices of maize flour, rice and sugar, among others.
Stanbic indicated that surveyed companies had noted an increase in business activity for the third month with respondents reporting growth in new orders, amid improving customer demand.
The Index also reported expansion in the service sector while reductions in output were recorded in agriculture, construction, industry and wholesale and retail.
Input prices continued to rise during October, extending the current sequence to 15 months, due to an increase in the prices for electricity, fuel and water.
Each of the surveyed sectors, among them, services, agriculture, construction, industry and wholesale and retail, posted an increase in input costs, forcing a rise in output prices for the 14th month in a row.
However, a drop in prices of some items were reported.
During the period, suppliers’ delivery time, the survey indicates, shortened supporting improvement in vendor performance, thus ending a three-month sequence of deterioration.
Inventories decreased for the second successive month, with agriculture, industry and wholesale and retail all registering stock depletion.
New orders, as has been the case in each of the past three months, rose in agriculture, but reductions were recorded elsewhere.
New export orders continued to fall, extending the sequence of reduction to six months.
However, Stanbic projects an improvement in customer demand supported with more than three-quarters of respondents indicating that business activity is expected to expand over the coming 12 months.
Just 1 percent of respondents expressed a pessimistic outlook.