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Low demand, input costs force drop in product rates
A number of goods registered a drop in prices due to low demand during June and July. PHOTO/MICHEAL KAKUMIRIZI
What you need to know:
- Low demand during June and July forced companies to cut product prices to maximise sales.
Product prices reduced during July on account of low demand and lower than usual input costs, according to data from Stanbic Purchasing Managers’ Index (PMI).
The Index, which measures the monthly performance of the economy based on purchasing activities of different procurement officers and company managers, indicates that all measured categories, apart from agricultural products, registered a drop in product prices due to low demand and input costs.
Product prices, the Index notes have reduced in both June and July due to subdued economic activity and Covid-19 induced disruptions.
During July, the Index indicates, business output slipped further, falling to 34.6 in July, down from 34.9 in June.
The decline was blamed on the 42-day Covid-19 induced lockdown, which ended last Thursday that sought to lessen the spread of Covid-19.
The latest reading is well below the 52.5 average with output, new orders and employment all falling below the average during the last two months.
The Index also notes that the Covid-19 induced lockdown is expected to create long-term impact with at least 55 per cent of respondents expecting sustained reductions in future.
Mr Ronald Muyanja, the Stanbic Bank head of trading, said the reduction in prices had been noted for the first time in 14 months with companies lowing selling prices due to weak demand.
However, he noted, companies had shown optimism, noting business activity would rebound post lockdown.
“Output decreased across agriculture, construction, industry, services and wholesale and retail categories,” Mr Muyanja said, noting that companies had also reported a possibility of a buildup in workloads due to the fact that companies had scaled back on employment and recruitment.
During the period, overall input costs declined, ending a 13-month sequence.
Suppliers’ delivery times during July widened largely because of delays created by the lockdown, which was characterised with travel restrictions and roadblocks.
Stocks of purchases decreased for the second consecutive month, reflecting a reduction in purchasing activity and lack of workloads.
Close to 38 per cent of respondents signaled a reduction in inventories, compared with 11 per cent in June.
