PMI: Economy registers higher employment numbers for first time in six months

There is good news for the economy about rising employment levels for the last six months as the country continues to recover from the COVID-19 pandemic hit.

According to Stanbic Bank Uganda’s Purchase Managers’ Index (PMI) for the month of November, job creation was signalled in the country’s private sector for the first time in six months during the month as companies responded to market needs.  

The headline PMI posted 54.1 in November, down slightly from 54.6 in October.

Ferishka Bharuth, an Economist – Africa Regions at Stanbic Bank commented said, though the headline PMI slightly reduced in November compared to the previous month, the PMI still points to an improvement in business conditions and has remained expansionary for the past four months.

“With economic conditions recovering, companies are emboldened to adjust their selling prices upwards for the third consecutive month, as their input costs have been rising,” Bharuth said, “notwithstanding the uncertainty as the pandemic evolves, companies remained optimistic that business activity will increase further over the next year.”

In line with the headline figure, both output and new orders increased for the fourth month running in November.

“The health of the private sector has now strengthened in each of the past four months,” said Ronald Muyanja, the Head of Trading at Stanbic Bank.

Muyanja said, anecdotal evidence pointed to stronger demand and higher customer numbers and that, for the third month running, all five monitored sectors saw output increase.

Meanwhile, the index shows, there were continued rises in input costs and selling prices. But sustained new order growth encouraged companies to increase their staffing levels, thereby ending a five-month sequence of decline.

Agriculture was the only category to buck the wider trend and post a reduction in employment.

Firms also increased their purchasing activity and inventory holdings in response to rising new orders.

Overall input costs rose amid higher costs for fuel, purchases and staff.

The rise in wages was the first in six months and came alongside renewed job creation.

Meanwhile, higher purchase costs reflected increases in price for a range of items, including cement, cooking oil, soap and sugar.

Firms also raised their own selling prices in November in response to higher cost burdens, and for the third month in a row.

Looking ahead, respondents (companies) remained optimistic that business activity will increase over the coming year, with sentiment supported by expectations of further improvements in new orders and customer numbers.

About PMI

Sponsored by Stanbic Bank and produced by IHS Markit, the PMI has been conducted since June 2016 and covers the agriculture, industry, construction, wholesale & retail and service sectors. Approx.400 private sector companies are interviewed to generate the survey’s findings.

The headline figure derived from the survey is the Purchasing Managers’ Index which provides an early indication of operating conditions in Uganda.

The PMI is a composite index, calculated as a weighted average of five individual sub-components: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%).

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

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