Strong demand conditions contributed to increased input buying in March, as businesses stocked up in anticipation of further activity growth later in the year. This led to a slight rise in the Stanbic Purchasing Managers’ Index (PMI), which reached 52.9, up from 52.6 in February.
The latest data showed back-to-back improvements in Uganda's private sector health for the second consecutive month, with further gains in output, new orders, and employment.
Christopher Legilisho, Economist at Stanbic Bank, said, "The March PMI confirms a robust private sector, with consumer demand supporting growth in output, new orders, employment, and inventories. All sectors surveyed experienced broad-based growth in Q1 2025. Firms remain optimistic, anticipating sustained consumer demand throughout the year."
The PMI survey is compiled by S&P Global from responses to questionnaires sent to about 400 purchasing managers across various sectors, including agriculture, mining, manufacturing, construction, wholesale, retail, and services. The index is based on five factors: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%), and Stocks of Purchases (10%). Readings above 50.0 indicate improvements in business conditions, while readings below signal deterioration.
New business received by Ugandan firms rose once again, with respondents citing new customer acquisitions and strong demand conditions. However, inflationary pressures persisted, with rising purchase and staff costs pushing up overall input prices. In response to these pressures, companies raised their output charges, aided by accommodating demand conditions.
Legilisho noted, "Rising input costs kept prices under pressure in March. Firms felt the strain from higher utility bills, shipping fees, and commodity prices, alongside rising staff costs. However, favourable economic conditions allowed businesses to pass these costs on to consumers. The March PMI signals a sustained improvement in the private sector's economic conditions."
Reflecting a general increase in new orders, all five monitored sectors saw higher business activity by the end of Q1. Business confidence in the output outlook for the next 12 months remained strong in March, with firms hopeful for further improvements in sales and new client acquisitions.
In response to increased demand, businesses raised staffing levels, particularly through the hiring of temporary workers. This job creation allowed companies to reduce their backlogs of work for the third consecutive month in March.
However, higher utility, raw material, and staffing costs resulted in a rise in operating expenses across the board. Purchase prices and wage bills increased once again in March. To offset these higher costs, companies raised their output charges for the seventh month in a row. The positive sales environment allowed firms to pass on increased input prices to their clients.
With new orders on the rise, businesses expanded their input buying to build up safety stocks, leading to an increase in pre-production inventories. Suppliers’ delivery times also improved further in March.
