Domestic demand buoys Uganda’s private sector, PMI shows

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Employees move a trolley filled with chicken to a cold room inside Yo Kuku chicken abattoir in Semuto district, north of Ugandan capital Kampala, April 16, 2015. REUTERS/James Akena

By Elias Biryabarema

KAMPALA, July 5 – Uganda’s private-sector business activity expanded faster in June than it did in May, buoyed by stronger domestic demand and looser monetary policy, a survey

showed on Wednesday.

The Markit Stanbic Bank Uganda Purchasing Managers’ Index (PMI) rose to 52.8 last month from 51.0 in May. Anything above 50 indicates expansion; anything below, contraction.

A Markit statement said “output, new orders, employment and stocks of purchases” had all contributed to the higher index.

“The private sector continues to recover, supported by the easing of the monetary policy,” Jibran Qureishi, East Africa economist at Stanbic Bank, said in a commentary accompanying the survey.

Last month, the Bank of Uganda cut its key lending rate to 10 percent from 11 percent, continuing a round of easing that has been running for about a year. The central bank wants to encourage a greater flow of credit to the private sector to stimulate economic growth.

Uganda’s economy expanded 3.9 percent in the fiscal year to the end of June, below an initial forecast of 5.5 percent.

Drought and a diminished flow of private-sector credit curbed its growth. Wednesday’s survey showed private-sector payrolls increased, with construction and services adding the most jobs. But companies faced higher costs, mostly from utilities, staff and raw materials, the survey said.

“As economic activity improves in the second half of the year, imports may rise and put pressure on the exchange rate, which could subsequently raise costs for firms,” Qureishi said.

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