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Uganda's private sector saw continued growth in July, with the headline Stanbic Bank Purchasing Managers’ Index (PMI) standing at 53.6.
Although this figure is a slight dip from the 55.6 recorded in June, it still indicates a sixth consecutive month of improving business conditions.
The PMI, which is a weighted average of key indicators like new orders, output, and employment, shows that buoyant demand prompted firms to increase their purchasing activity and hire additional workers.
According to Christopher Legilisho, Economist at Stanbic Bank, the latest data points to a healthy private sector, with robust employment conditions driven by current and anticipated output growth.
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He added that backlogs of work increased for the first time since December 2024, a likely consequence of the strong new order demand across various sectors.
Kampala City
Increased Costs Lead to Higher Prices
Despite the positive growth, businesses faced significant inflationary pressures in July.
The overall input costs rose again, driven by higher purchase prices and wage bills. Firms reported that the cost of key inputs such as utilities, fuel, timber, and cereals had increased, forcing them to raise their own output charges.
The decision to pass on these greater costs to customers was a direct response to the heightened operating expenses. This trend was seen across most sectors, with the exception of the construction industry, which was the only segment to record a drop in selling prices. However, the optimism about future business conditions remains high across all sectors, with firms forecasting greater customer numbers and favourable demand, which suggests strong economic growth in the upcoming months.
Hiring and Purchasing Activity on the Rise
To manage the increased workload from new orders, Ugandan businesses expanded their staffing levels in July, hiring both temporary and permanent workers.
The manufacturing sector was the only segment to report a decline in employment. This increase in the workforce was complemented by a surge in purchasing activity, as firms sought to not only process new orders but also build up their safety stocks.
Inventories expanded for the fifth month in a row, signalling a robust effort by companies to prepare for sustained demand.
This proactive approach to both hiring and purchasing, despite a renewed decline in vendor performance, highlights the confidence Ugandan businesses have in the country's economic trajectory for the near future.