Free Access | 2024-04-12

The Performance of the Manufacturing Sector Declines amidst a Slight Improvement in Business Sentiments

Authors/Editors: Rehema Kahunde ,  Hildah Namuleme

Abstract:

The Business Climate Index (BCI) improved marginally by 4 percentage points to 91 in the current quarter (October-December 2024) from 87 in the previous quarter (July to September 2024).The slight improvement registered during the quarter was on account of reduced input cost, increased capacity utilisation, business activity, and profitability, primarily stemming from end-of-year and Christmas season business sentiments. Particularly, business sentiments within the service sector registered significant improvements of 14.8 percentage points, rising to 93 from 79 in the previous quarter based on increased sales turnover, incoming of new businesses and increased business activity. Nonetheless, sentiments in the Manufacturing sector declined by 9 percentage points to 76.9 from 85.9. The deterioration in business perceptions within the manufacturing sector is partly due to reduced capacity utilisation, low business activity, low business optimism and unfavourable product prices. Nonetheless, the near-term business sentiments (January-March 2025) indicate anticipated slight improvements in conditions for doing business from the current 91 index points to 93.5 index points. This improvement will mainly be driven by the expected advancement in the manufacturing sector. The favourable business conditions in the upcoming quarter is attributed to a projected improvement in the general business environment, lower input costs, improved product prices, and a rise in business activity spurred by the reopening of schools following the extended third-term holiday break.