Uganda’s private sector activity slows on soaring costs

A construction worker fastens metal bars on the rooftop of a new hospital under construction.

Tempo of economic activity in Uganda’s private-sector slowed in January from the previous month, depressed by soaring input costs for firms, a survey showed on Monday.

The Markit Stanbic Bank Uganda Purchasing Managers’ Index (PMI) declined to 52.0 last month from 54.3 in December.

A reading above 50 indicates expansion; anything below, a contraction.

“Overall input prices rose at the start of the year”  Markit said.

The rise in costs was reported across all monitored sectors: agriculture, construction, industry, services and wholesale and retail.

The index also declined last month from November and Markit cited higher costs as the same factor that dragged down the tempo of economic activity.

During January, however, there was strong demand which helped underpin growth as “firms continued to win new business”.

In a note, Jibran Qureishi, East Africa economist at Stanbic Bank, said they expected better agricultural productivity and “an increase in public investment in infrastructure to support economic activity over the coming year.”

Uganda is implementing a series of mega-projects including hydropower plants, roads, a crude export pipeline and an airport expansion to try to improve business environment and lift sagging growth.

GDP expanded at 3.9 percent in the 2016/17 (July to June) financial year from 4.8 per cent the year before, according to the central bank.

This year, growth is projected at five percent.

Authorities are eager to drive growth to around 7 percent, a rate, they say is needed to absorb a swelling labour force.

Detailed PMI data are only available under license from IHS Markit and customers need to apply for a license.

Amaka E. Nliam