Positive customer demand bolsters business conditions in May
The continued improvement in business conditions was largely driven by stronger client demand, prompting firms to hire more staff and increase input purchase
KAMPALA, June 19, 2025 –– Confidence in Uganda’s private sector rose to its highest level in nearly two years, as the headline Stanbic Bank Purchasing Managers’ Index [PMI] climbed to 56.4 in May, up from 55.3 in April. This marks a notable improvement and remains well above the 50.0 threshold that separates growth from contraction.
Speaking bout the PMI in Kampala, Christopher Legilisho, Economist at Stanbic Bank Uganda, commented: “Stanbic Bank Uganda’s PMI data for May reflects continued strength, reaching the highest level in 23 months. This suggests sustained momentum in the private sector, underpinned by robust new orders and output, driven by strong customer demand across all monitored sectors. As a result, Ugandan firms increased staffing levels, both full-time and part-time, for a fourth consecutive month. Staffing costs also rose, as some companies offered bonuses to motivate workers.”
The Stanbic PMI is compiled by S&P Global based on responses from purchasing managers at around 400 private sector firms across sectors such as agriculture, mining, manufacturing, construction, wholesale, retail, and services.
The PMI is a weighted composite of five key indicators: New Orders [30 percent], Output [25 percent], Employment [20 percent], Suppliers’ Delivery Times [15 percent], and Stocks of Purchases [10 percent].
The continued improvement in business conditions was largely driven by stronger client demand, prompting firms to hire more staff and increase input purchases. Optimism about future output also encouraged stockpiling.
At the same time, higher staff and input costs contributed to overall input price inflation. Reflecting buoyant demand, firms again raised their selling prices in May.
“With greater operational capacity, firms were able to reduce backlogs of work, resulting in a further decline in outstanding orders during May,” Legilisho added. “Purchasing activity increased, and inventory levels rose in response to higher input buying.”
He further noted: “Firms raised output prices to reflect stronger demand, while input and purchase costs continued to rise due to increased operational expenses and higher prices for key goods such as cement, soap, and food. These trends point to a moderate build-up of inflationary pressures. Nonetheless, businesses remained confident about the outlook, anticipating continued growth in demand and output over the next 12 months.”
The May data marks the fourth consecutive month of improved operating conditions in Uganda’s private sector. The overall upturn was supported by a further rise in new business, with the increase in new orders attributed to stronger demand and the acquisition of new customers, according to survey respondents.
Output also rose for a fourth month running, continuing the positive trend that began in February. Most firms cited an increase in new orders as the primary driver of higher activity levels.
At the sector level, gains in both output and sales were broad-based, spanning all five monitored industries.
The continued rise in sales and business requirements fuelled another round of job creation. May marked the fourth successive month of employment growth, with firms reporting increases in both temporary and permanent hires across all sectors.
Higher employment levels helped companies reduce their work backlogs, which fell for a fifth straight month.
Private sector firms remained optimistic about business prospects in the year ahead. Investment in marketing and promotional activities, coupled with expectations of stronger demand, contributed to this positive sentiment.
Input prices, however, continued to rise. Respondents pointed to higher staff and purchase costs, driven by increased hiring and rising prices for materials such as food and fuel.
To manage these rising costs, businesses passed them on to consumers through higher selling prices. However, price increases were mostly concentrated in the agriculture and services sectors.
Despite a slight deterioration in supplier performance, firms expanded their input purchases and inventory levels in anticipation of sustained customer demand and further growth in new business.
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