Uganda experienced a slump in economic activity in the month of June 2021 due to the second Covid-19 induced lockdown, latest statistics show.
The Stanbic monthly Purchasing Managers’ Index (PMI) shows a drop to 34.9 in June from 56.5 in May.
PMI is a survey-based indicator of business conditions, which includes individual measures of business output, new orders, employment, costs, selling prices, exports, purchasing activity, supplier performance, backlogs of orders and inventories of inputs and outputs, among others.
According to the June index, the imposition of a 42-day lockdown in the country impacted negatively on business conditions across the private sector. Falls were seen in output, new orders and employment, while companies lowered their selling prices to try and attract business.
Reductions in output and new orders were seen across each of the five sectors of agriculture, industry, construction, wholesale, retail and services covered by the survey.
The reading signalled deterioration in business conditions for the first time in five months, and was below the series average of 52.8.
Ronald Muyanja, the Head of Trading at Stanbic Bank Uganda said, with workloads down amid the lockdown, companies scaled back their employment and purchasing activity, in both cases for the first time in five months.
The reduction in employment meant that staff costs also fell according to Muyanja.
“Restrictions on travel meanwhile resulted in longer suppliers’ delivery times, lower input buying and delays in the delivery of materials fed through to a reduction in inventories,” he said.
Meanwhile, companies lowered their selling prices as part of efforts to attract customers.
This was despite a further increase in purchase costs, which largely reflected higher raw material prices amid product shortages.
Construction and industry each saw purchase costs increase, while falls were recorded in the agriculture, services, wholesale & retail sectors.
“There were hopes that business activity will rebound once the lockdown measures are lifted, supporting optimism in the 12-month outlook for output,” Muyanja said.
Ferishka Bharuth, Economist – Africa Regions at Stanbic Bank said, despite an increase in purchase costs, which largely captured higher raw material prices due to global shortages, companies lowered their selling prices to attract customers.
Bharuth said that the impact of the lockdown on the headline PMI is likely to be transitory, and fade as lockdown measures are eased.
“There is the risk that some lockdown restrictions may be extended, which could delay the rebound in economic activity amidst the recent spike in Covid-19 cases,” he added.
The monthly survey involves a questionnaire to some 400 purchasing managers and has been conducted since June 2016.