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New order growth spurs continued improvement in Ugandan business conditions in June

Watchdog Uganda by Watchdog Uganda
2 months ago
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There was a slight drop in the latest headline monthly Stanbic Purchasing Managers’ Index (PMI) despite the private sector companies surveyed, reporting a further improvement in business conditions. The Stanbic PMI slipped down to 55.6 in June compared to the 56.4 reading recorded in May.

However, the latest figure still marks the fifth month of continuously improving business conditions, as the Stanbic PMI remained above the 50.0 threshold, supported by growth in employment, purchasing and stocks.

Christopher Legilisho, Economist at Stanbic Bank said, “The Stanbic Uganda PMI signaled an overall expansion for a fifth straight month in June due to robust economic conditions in the private sector, with both output and new order growth still healthy. Employment also expanded in June due to positive business growth foreseen over the coming months. This was further reflected by increases in purchasing as well as higher inventories. We therefore infer that GDP growth will prove strong in 2025 due to positive aggregate demand across most sectors.”

According the June report, benefited from quicker delivery times for inputs and were able to reduce their backlogs again. At the same time, increases in staff and purchase costs were noted again. Nonetheless, output charges were broadly unchanged.

The monthly Stanbic PMI is compiled by S&P Global from responses to questionnaires sent to about 400 purchasing managers. The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services.

The Stanbic PMI is a weighted average of the following five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.

Legilisho said, “Further, input prices, purchase costs and staffing costs rose again, but output charges were broadly unchanged on the month. Encouragingly, the long-term trends imply subdued inflation because of appropriate monetary conditions, an appreciating shilling, and deflation in energy prices. Indeed, headline inflation came to just 3.9% year-on-year (0.1% m/m) in June, from 3.8% y/y (0.5% m/m) in May.”

Supporting the overall upturn was another rise in new business at the end of the second quarter. Ugandan firms noted that demand conditions remained favorable, with new client wins also helping drive the upturn.

In response, companies raised their output levels during June and the expansions in new business and activity levels were broad based by sector.

However, despite accommodative demand conditions, Ugandan firms signaled a broad stagnation in output charges in June. Although some sought to pass on higher costs to customers, others noted discounting to remain competitive. At the sector level, only agriculture and wholesale & retail recorded a rise in selling prices.

Nevertheless, input costs continued to rise in June. Higher staff and purchase costs were reported, as wage bills, fuel and material prices increased. Only construction firms recorded a drop in purchase and overall cost burdens.

At the same time, businesses registered an increase in employment. Greater new order intakes reportedly drove a rise in both temporary and permanent staff.

An expansion in capacity also enabled firms to work through their backlogs effectively during June. The level of incomplete work fell for the sixth month running.

Meanwhile, shorter lead times for inputs and strong demand conditions spurred growth in input buying and stockpiling in June.

Positive output expectations for the year ahead were broad based in June. Overall, Ugandan businesses linked confidence in the outlook to investment in advertising and greater outreach to new customers.


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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