The latest Stanbic Bank Purchasing Managers’ Index (PMI) survey has revealed how the Ugandan private sector moved into contraction territory at the start of 2025, as business conditions deteriorated for the first time since March 2024.
The survey details show that output broadly stagnated, amid weak demand and a renewed drop in new business. Although companies signalled upbeat expectations regarding the outlook for activity, firms cut jobs further amid signs of spare capacity.
The Stanbic Bank PMI compiled by S&P Global, a New York business intelligence firm aggregates responses to questionnaires sent to purchasing managers in a panel of around 400 private sector companies. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services.
The PMI survey readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
The headline PMI posted at 49.5 in January, down from 53.1 in December, to signal a renewed decline in the health of the Ugandan private sector. Moreover, the downturn was the first for almost a year. Weighing on the private sector’s overall performance was a fresh decrease in new orders during January.
The latest fall ended a nine-month sequence of growth, with panellists often highlighting weak client demand and reduced purchasing power at customers.
Lower new orders subsequently dampened business activity levels, which were broadly unchanged on the month in January. Unlike the fall in new business, which was largely centred on the service sector, the decline in output was broad-based by the monitored segment.
Average input prices continued to increase at the start of 2025, following higher reported purchase and staff costs. Survey respondents noted that utility and raw material costs ticked up, with some also mentioning increased overtime payments to staff.
Anastacia Tshesane to become PwC SA CEOUgandan businesses raised their selling prices, in response, with output charges increasing for the fifth month running. Although the uptick in total input prices was broad-based by sector, construction registered a reduction in output charges in January.
Ugandan private sector firms cut employment for the third month running in January, amid lower new orders and renewed evidence of spare capacity. Companies indicated a drop in backlogs of work, following an increase in December.
Finally, despite hikes in purchase costs, Ugandan businesses signalled another monthly increase in input buying in January. A fourteenth successive monthly improvement in vendor performance helped support firms’ efforts to build safety stocks, as inventories rose further.
Nonetheless, private sector firms remain upbeat in their expectations regarding the outlook for output over the coming year. Business confidence is still positive in all sectors amid hopes of stronger demand conditions in the coming months.
Christopher Legilisho, Economist at Stanbic Bank, while commenting on the PMI survey noted that, firms reported an increase in input costs due to higher utility bills as well as a rise in purchase prices for staple products for instance, foodstuff, stationery, cement and toiletries.
He also added that staff costs rose too, with a slight uptick in the manufacturing, wholesale and retail segments while output prices too increased as firms passed on higher input and purchase prices to consumers.
“This implies a slight rise in inflationary pressures in January compared to the case in December, aligning with the inflation print that rose to 3.6% year-on-year. The private sector is upbeat about the business outlook for the next 12 months,” he said.
