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Business sector rebounds in February - Stanbic report

Peter 10th Mar, 2025 Economy Pedson Mumbere
Business sector rebounds in February - Stanbic report

Officials inspect a consignment of pipes for the construction of the EACOP. The February survey attributes the renewed expansion to increased demand and new business orders, prompting firms to raise input purchases and staffing levels. FILE PHOTO


Uganda's private sector showed signs of recovery in February, after a temporary slowdown at the start of the year, the Stanbic Bank Purchasing Managers’ Index (PMI) has shown.

The report shows that the PMI climbed to 52.6, up from 49.5 in January, indicating an improvement in the business environment.

The Purchasing Managers' Index (PMI) is an important economic indicator that provides valuable insights into the health and direction of an economy, and is widely followed by economists, policymakers, and investors, as an important tool for investors and policy-makers to make informed decisions.

  • Speaking at the February PMI dissemination event in Kampala recently, Christopher Legilisho, an economist at Stanbic Bank, said the private sector regained momentum as both output and new orders surged after dipping in January

“The Uganda PMI for February shows a private sector back in expansion, with both output and new orders growing robustly. There was strong demand across all sectors. Employment in the private sector accelerated again after three months of decline due to increased new orders, while backlogs fell because of sufficient capacity. Purchasing activity was elevated as firms factored in output having recovered convincingly, but inventories fell for the first time in 12 months,” Legilisho explained.

The February survey attributes the renewed expansion to increased demand and new business orders, prompting firms to raise input purchases and staffing levels.

  • New orders resumed growth, reversing January's dip and continuing an upward trend seen since April 2024. Employment levels rose, ending a three-month period of job cuts.

However, the manufacturing sector was the only one to record a drop in employment. Stronger demand led to broad-based output growth across all sectors.

The Stanbic PMI is compiled by S&P Global, based on responses from approximately 400 purchasing managers across various sectors including agriculture, mining, manufacturing, construction, wholesale, retail, and services.

The index is calculated using weighted averages of key indicators: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%), Stocks of Purchases (10%).

A PMI reading above 50.0 signals economic expansion, while below 50.0 indicates contraction.

  • Despite the overall improvement, Ugandan firms faced higher cost burdens due to increased purchase prices and wage bills. As a result, businesses raised their output prices for the sixth consecutive month to offset rising expenses.
  • “There were pricing pressures related to input and purchasing prices as utility bills and selected commodity prices increased. Staff costs and output prices continued to rise, though at a slower pace. The private sector remains highly optimistic about future output, although optimism has slightly dipped since January. The February PMI suggests durable economic conditions in the private sector,” Legilisho noted.

Panellists highlighted that customer acquisition played a crucial role in boosting new orders. Increased employment levels helped reduce backlogs of work, allowing firms to meet demand more efficiently.

However, higher business expenses, particularly in utilities and raw materials, remain a challenge.

With confidence levels still high despite a slight decline in optimism, Uganda’s private sector is positioned for continued growth, provided cost pressures remain manageable and demand remains strong.

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