The Stanbic Purchasing Managers’ Index (PMI) for Uganda showed a slight decline in August, dropping from 53.9 in July to 51.6. This dip was attributed to concerns arising from the World Bank’s decision to suspend further loans to the country. Despite this, there is still optimism in the business sector, driven by a consistent flow of new orders, as stated in a recent release by the lender on September 7.
August marked the thirteenth consecutive month of output expansion in Uganda, despite the dip in PMI. Survey respondents attributed this growth to increased demand. Christopher Legilisho, an Economist at Stanbic Bank, highlighted the robust performance of Uganda’s private sector in August, even in the face of foreign exchange market volatility following the World Bank’s suspension of project support.
While certain sectors like construction and services experienced growth, others, including agriculture, industry wholesale, and retail, saw reduced activity due to financial pressures in the economy.
The Stanbic PMI, compiled by S&P Global through surveys sent to purchasing managers in around 400 private sector companies, covers various sectors such as agriculture, mining, manufacturing, construction, wholesale, retail, and services. It calculates the PMI based on five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%), and Stocks of Purchases (10%). A reading above 50.0 indicates improving business conditions, while below 50.0 suggests deterioration.
In the third quarter, new orders continued to rise, attributed to the acquisition of new customers. Companies express optimism about future business prospects, planning to increase employment, inventories, and purchasing activity in response to growing orders. However, there was a noticeable decline in export orders.
Input costs for the Ugandan private sector increased in August, primarily due to higher charges for electricity and water. This cost increase affected all monitored sectors, prompting firms to raise their selling prices. Some companies, however, offered discounts to stimulate demand amidst mounting financial pressures.
August also witnessed an expansion of input inventories in companies, marking the tenth consecutive month of growth. While the workforce expanded in various sectors, backlogs of work decreased for the first time since February across all sectors covered by the survey.
Looking ahead, companies maintain optimism about future output growth, with 88% of respondents foreseeing expansion. They anticipate increased customer numbers and improved demand to support this growth.