Uganda’s private sector has displayed remarkable resilience, with the Stanbic Purchasing Managers’ Index (PMI) for November rising to 55.7, up from 52.9 in October.
This marks the eighth consecutive month of expansion, reinforcing the positive business climate in the country. PMI readings above 50.0 signal an overall expansion in business activity, and November’s surge indicates sustained optimism about the nation’s economic outlook.
Christopher Legilisho, an economist at Stanbic Bank, attributed the growth to increasing optimism regarding both the current and future economic conditions.
“The November results reflect strong customer demand, which fueled increases in output and new orders across various sectors,” Legilisho stated. He noted, however, that despite the growth, employment dipped slightly during the period.
The PMI is a composite index, compiled by S&P Global, based on a survey of businesses across multiple sectors. The five key indicators that make up the PMI are new orders, output, employment, supplier delivery times, and stocks of purchases. Notably, all five monitored sectors—agriculture, mining, manufacturing, construction, and services—reported expansion in business activity and new orders in November, underscoring broad-based growth across Uganda’s economy.
In response to the surge in demand, businesses increased their purchasing activity and built inventories. This helped to support greater output and improved supplier delivery times, which played a significant role in sustaining the expansion. However, businesses also faced mounting operational costs. Higher prices for construction materials, food, toiletries, and energy contributed to a rise in inflation, prompting companies to raise their selling prices for the third consecutive month. Additionally, total input costs increased due to higher purchase prices and rising staff expenses.
Legilisho noted that while rising costs posed challenges to profitability, the private sector’s adaptability remained strong. “Despite the increase in new orders, businesses were able to reduce backlogs of work, reflecting improvements in efficiency,” he explained. This suggests that firms have become more streamlined in managing their operations, even as demand continues to grow. Input buying also grew during the fourth quarter, supported by improved delivery times from suppliers.
Despite the challenges of rising operational costs, businesses remain optimistic about the future. Legilisho highlighted that firms are planning investments and anticipate strong consumer demand in the coming year. This forward-looking optimism reflects a broader belief in Uganda’s economic recovery and the private sector’s ability to navigate challenges while positioning itself for future growth.
One notable aspect of the November results was the slight dip in employment levels across all sectors. This was attributed to businesses focusing on cost containment in response to rising input costs, along with the reduced backlogs of work as demand surged. However, this does not signal a long-term trend, as the general outlook remains positive, with businesses focused on preparing for future opportunities.
Overall, Uganda’s private sector continues to demonstrate resilience, even in the face of rising operational costs. With businesses strengthening their operations, building safety stocks, and investing in the future, the outlook for Uganda’s economy remains promising as it enters 2024.
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