Buoyant demand during July prompted firms to increase their purchasing activity and hire additional workers, as backlogs of work returned to growth, even though the headline Stanbic Bank Purchasing Managers’ Index (PMI) dropped to 53.6 from 55.6 in June.

Part of the reason for the slowdown was 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 on the 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 compared to the previous month, while readings below 50.0 indicate 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 added:
“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 improvement in business conditions, with sustained increases in business activity and new sales. Growth was broad-based across sectors.

According to respondents, strong demand conditions, new client wins, and more frequent customer referrals drove the latest expansion in new orders. July data signaled an extension of the current sequence of growth, which now spans six months.

In turn, Ugandan businesses increased their output levels in July to meet the rising new orders. However, some strain on capacity was reported, as firms indicated a fresh accumulation of backlogs of work — the first such rise in seven months.

To manage the influx of new work, Ugandan businesses expanded staffing levels again, hiring both temporary and permanent workers. The manufacturing sector was the only segment to see a decline in employment.

Similarly, greater new order inflows spurred further growth in input purchases in July. Firms also sought to build safety stocks, resulting in inventory levels expanding for the fifth consecutive month.

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 reported price increases for inputs including utilities, fuel, timber, and cereals.

Consequently, output charges at Ugandan firms rose again in July. At the sector level, only construction companies recorded a drop in selling prices.

Output expectations among Ugandan firms remained positive in July, with forecasts of greater customer numbers and favorable demand conditions continuing to spur optimism.