Uganda's Private Sector Expands for Seventh Month

The latest Stanbic Purchasing Managers’ Index (PMI) data reveals continued expansion in Uganda’s private sector for the seventh consecutive month, as both business activity and new orders keep rising. October's headline PMI recorded 52.9, down slightly from September's 54.2, but still indicating positive growth in business conditions.

Data collected between 10 and 29 October 2024 shows that the improvement in Uganda's private sector is largely driven by rising demand, which has prompted firms to boost output and hire more staff. This growth has been further supported by increased spending on advertising and enhanced product quality, sustaining strong demand across multiple sectors.

Commenting on the findings, Mulalo Madula, Senior Analyst at Stanbic Bank, noted, “The latest PMI data for Uganda indicates sustained growth in the private sector, marking seven consecutive months of expansion. The persistent rise in output reflects favourable demand, encouraging companies, particularly in manufacturing, to increase staffing even as backlogs of work decrease.”

While firms reported a rise in both purchasing and staffing costs, leading to higher input prices overall, they managed to pass these costs on to consumers, resulting in increased selling prices. The survey highlights that higher wages and raw material costs were primary drivers of inflation, reflecting strong demand across all five monitored sectors.

This data points to a positive demand outlook, with Ugandan businesses also expanding inventory levels in preparation for anticipated growth. Mulalo adds that despite rising costs, overall business sentiment remains optimistic, with firms expressing confidence in sustained demand and planned advertising spending.

“The consistent increase in output reflects favourable demand, leading companies, particularly in manufacturing, to expand their workforce, even as backlogs ease,” Mulalo said. “The October PMI results demonstrate the resilience of the Ugandan economy, with firms benefiting from robust demand. The sustained output growth is promising, and firms remain optimistic about future growth, supported by planned advertising investments and demand expectations.”

The survey also revealed a steady rise in input prices, as purchasing and staffing costs climbed, driving up selling prices. However, businesses’ ability to transfer these costs to consumers suggests a healthy demand environment, and overall business sentiment remains positive, signalling ongoing growth in the private sector.

The PMI underscores the resilience of Uganda’s economy, indicating that the private sector is on track to maintain its growth trajectory. As firms navigate rising costs, their adaptability and response to market demand will be crucial in sustaining this positive momentum.

The Stanbic PMI is compiled by S&P Global based on responses from around 400 purchasing managers across sectors including agriculture, mining, manufacturing, construction, wholesale, retail, and services. The PMI is a weighted average of five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%), and Stocks of Purchases (10%).