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Strong Client Demand Powers Uganda’s Private Sector Growth Amid Rising Costs

Mourice Muhoozi by Mourice Muhoozi
11 months ago
in National, News
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Uganda’s private sector has continued to record positive growth, with the Stanbic Purchasing Managers’ Index (PMI) indicating a significant improvement in activity at the start of the third quarter. 

The PMI rebounded to 53.7 in July, up from 51.9 in June, signaling a robust expansion in the country’s private sector. This marked the fourth consecutive month of growth, driven largely by increased new orders across all monitored sectors.

The PMI, which measures the economic health of the private sector, showed that firms were increasingly confident in the future, with many attributing the growth to the acquisition of new clients. 

July’s figure, though slightly lower than the 54.1 recorded in May, suggests that the economy remains on a strong growth trajectory, with all sectors participating in the upturn.

Christopher Legilisho, an economist at Stanbic Bank, highlighted the positive sentiment within the private sector, noting, “The July PMI revealed a robust private sector economy performance. For the fourth month now, surveyed firms have indicated strong output and new orders, linked to strong client demand conditions across all economic sectors in July. Firms are optimistic that client demand conditions will persist over the next 12 months.”

To meet the rising demand, businesses have responded by increasing employment, purchasing more inputs, and stockpiling raw materials. This surge in activity has led to shorter lead times for inputs, although it has also caused a rise in overall input prices due to higher costs for both staff and materials. In turn, businesses have raised their selling prices to accommodate these increased costs.

However, this positive momentum contrasts with the private sector’s performance earlier in the year. In February, the PMI registered a modest deceleration, dropping to 51.7 from 54.0 in January. This reduction, while still above the 50.0 threshold that indicates expansion, suggested a slight cooling in growth.

Legilisho had noted in February that despite the marginal softening, Uganda’s private sector continued to show resilience. “Even though we observed a marginal softening in the pace of private sector activity in February, the underlying strength of Uganda’s economic activity remains evident,” he remarked. 

The February report indicated sustained improvements in output and new orders for the 19th consecutive month, largely driven by increased customer demand.

The February survey also reported a rise in employment as companies sought to address work backlogs, which had been decreasing over the previous two months. However, unlike the broad-based growth observed in July, the February expansion was not uniform across all sectors, with agriculture being a notable exception. 

Furthermore, while purchasing activity increased, there was a decrease in stocks of purchases, indicating some variability in inventory management across sectors.

Input costs in February were also under pressure, primarily due to higher prices for fuel, materials, and utilities. This forced businesses to adjust their selling prices, similar to the trend observed in July.

The contrasting PMI figures from February and July highlight the dynamic nature of Uganda’s private sector. While February’s modest deceleration reflected some sector-specific challenges, the continued growth observed in July underscores the resilience and adaptability of businesses in Uganda. 

As the year progresses, firms remain optimistic about sustained growth, buoyed by strong client demand and strategic adjustments in their operations.


Do you have a story in your community or an opinion to share with us: Email us at editorial@watchdoguganda.com
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