Ugandan private sector new order growth sustained in July
Buoyant demand during July prompted firms to increase their purchasing activity and hire additional workers as backlogs of work returned to growth although the headline Stanbic Bank Purchasing Managers’ index (PMI) dropped to 53.6 from the 55.6 reading in June.
Part of the reason is that overall input costs rose again in July amid higher purchase prices and wage bills. Subsequently, firms increased their output charges in a bid to pass-through greater costs to customers.
The headline PMI figure is derived from a monthly survey of purchasing managers from about 400 firms and is carried out by S&P Global. Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.
The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services. The 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%).
Christopher Legilisho, Economist at Stanbic Bank said, “The Stanbic Bank PMI signaled further expansion in July amid healthy economic conditions in the private sector. Further, quantities purchased increased, and inventories were positive. Current and anticipated output growth culminated in robust employment conditions in July. Backlogs of work increased for the first time since December 2024 – likely due to strong new order demand.”
He said, “Inflationary pressures remained amid increases in input prices, purchase costs, and staff costs. Ugandan firms are optimistic about future business conditions across all sectors of the economy, implying strong economic growth in the upcoming months.”
The latest data indicated a sixth successive monthly pick-up in business conditions.
Contributing to the overall upturn were sustained increases in business activity and new sales. Growth in each was broad-based by sector.
According to panelists, driving the latest expansion in new orders were strong demand conditions, new client wins and more frequent customer referrals. July data signaled an extension to the current sequence of growth which now spans six months.
In turn, Ugandan businesses upwardly adjusted their output levels in July, to facilitate increased new orders. However, some strain on capacity was recorded as firms indicated a fresh accumulation of backlogs of work in July. The latest rise was the first in seven months.
To help process incoming new work, Ugandan businesses expanded their staffing levels again. Panelists noted hiring both temporary and permanent workers, with the manufacturing sector the only segment to see a fall in employment.
Similarly, greater new order inflows spurred further growth in input buying in July. Firms sought to also build safety stocks, as inventory levels expanded for the fifth month running.
The rise in purchasing activity came despite a renewed decline in vendor performance.
On the price front, increases in both staff and purchase costs drove another uptick in overall operating expenses. Alongside higher wage bills, companies stated that inputs including utilities, fuel, timber and cereals rose in price.
Consequently, output charges at Ugandan firms were raised again in July. At the sector level, only construction companies saw a drop in selling prices. Output expectations among Ugandan firms remained positive in July with forecasts of greater customer numbers and favourable demand conditions reportedly spurring optimism – https://www.youtube.com/watch?v=F8LPleFqdJg&t=323s
