Uganda’s private sector confidence in business conditions reached its highest level in nearly two years, with the headline Stanbic Bank Purchasing Managers’ Index (PMI) rising to 56.4 in May, up from 55.3 in April. This figure is well above the 50.0 threshold that signals improved operating conditions.
Christopher Legilisho, Economist at Stanbic Bank, noted, “The PMI expanded to the highest level in 23 months, reflecting sustained momentum in the private sector. Robust new orders and output were driven by increased sales and strong customer demand across all monitored sectors. Firms also boosted staffing levels both part-time and full-time amid rising output, with some offering bonuses to motivate workers.”
Compiled by S&P Global, the Stanbic PMI is based on responses from purchasing managers at approximately 400 private sector firms across sectors including agriculture, mining, manufacturing, construction, wholesale, retail, and services. The index is a weighted average of five key components: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%), and Stocks of Purchases (10%).
May’s expansion was underpinned by stronger client demand, prompting firms to raise staffing levels and increase input purchases. Anticipation of future growth also led companies to build up inventories.
However, overall input price inflation persisted, driven by higher purchase and staff costs. Firms responded by raising selling prices once again in May, in line with accommodative demand conditions.
“With greater operational capacity, firms were able to reduce backlogs, leading to a further drop in outstanding work,” said Legilisho. “Purchasing activity expanded, and inventories rose as firms increased input buying.”
He added, “Selling prices were raised in response to strong demand, while input and purchase costs continued to rise primarily due to higher operating expenses and increased costs of key goods like cement, soap, and food. This points to a moderate build-up in inflationary pressures. Despite this, firms remained optimistic, anticipating continued growth in demand and output over the next year.”
May marked the fourth consecutive month of improvement in Uganda’s private sector operating conditions. A key driver was the sustained rise in new business placed with firms, supported by strong demand and new customer acquisitions.
Output also continued to grow, extending the expansion trend that began in February. The increase in activity was largely attributed to higher order volumes.
At the sector level, both output and new sales growth were broad-based. Rising demand and increased business needs spurred another round of job creation—the fourth in as many months. All five monitored sectors reported growth in employment, with firms adding both temporary and permanent staff.
This employment growth allowed businesses to reduce their backlogs, which declined for the fifth consecutive month.
Firms expressed strong optimism about future activity, driven by expectations of rising customer demand and increased investment in advertising and promotions.
Meanwhile, input prices continued to climb due to higher costs for materials especially food and fuel as well as increased staffing costs. In response, firms again passed on the cost increases to customers, although the uptick in selling prices was mainly confined to the agriculture and service sectors.
Despite a slight decline in supplier performance, businesses continued to expand input purchases and inventory levels in anticipation of further growth in customer demand and new business.
