Uganda's private sector experienced its slowest growth since January in September, as businesses faced increased fuel and transport costs, delayed customer payments, and pressure on supply chains. The Stanbic Bank Uganda Purchasing Managers' Index fell to 53.0 in September from 55.0 in August. A reading above 50 indicates an improvement in business conditions, while a reading below 50 signals deterioration. Despite the slowdown, the September reading marked the seventh consecutive month of improving private sector business conditions, which began in February 2025.
According to Stanbic Bank economist Christopher Legilisho, new orders and output remained resilient during the month, supported by favourable demand conditions. New orders increased across all sectors covered by the survey, with businesses attributing the rise to customer demand, advertising, and promotional activity. However, agriculture and wholesale and retail businesses recorded declines in output. The sector's growth was largely driven by favourable demand conditions, which encouraged businesses to increase production.
Operating costs increased during September, with companies reporting higher spending on fuel, transport, logistics, utilities, and wages. Input costs rose across all five sectors monitored, leading businesses to pass on the higher costs to customers. Selling prices increased in every sector except construction, as companies sought to maintain profitability. The rise in operating costs was a major challenge for businesses, which had to balance the need to increase production with the need to manage costs.
Supply chains also came under pressure in September, with supplier delivery times lengthening due to international transport delays and higher fuel costs. In response, companies increased purchases and built up stocks to meet current orders and prepare for future demand. Inventories have now increased for 19 consecutive months, as businesses sought to mitigate the risks associated with supply chain disruptions. The lengthening of supplier delivery times was a significant challenge for businesses, which had to adapt quickly to changing circumstances.
Employment increased in September, as businesses recruited temporary and permanent workers to handle new orders. However, backlogs of unfinished work rose for the fourth consecutive month, with some companies reporting that delayed customer payments were affecting cash flow and their ability to process incoming orders. The payment delays pointed to working capital pressure among some businesses, which had to manage their finances carefully to avoid liquidity problems.
Despite the challenges, businesses remained confident about activity over the coming year, citing expectations of continued customer demand, advertising, and improvements in products. The September PMI showed continued private sector expansion, alongside rising operating costs and pressure on cash flow and supply chains. The Bank of Uganda's Business Tendency Index also stood above the level associated with overall optimism in September, indicating that businesses continue to expect favourable conditions ahead.
The PMI covers about 400 private sector companies across agriculture, mining, manufacturing, construction, wholesale, retail, and services, tracking new orders, output, employment, suppliers' delivery times, and stocks of purchases. The survey provides a comprehensive picture of the private sector's performance, highlighting trends and challenges in different sectors. Overall, the survey suggests that Uganda's private sector continues to grow, albeit at a slower pace, as businesses navigate the challenges of rising operating costs and supply chain pressure.
Key points
- Uganda's private sector growth slowed in September due to higher fuel and transport costs.
- New orders and output remained resilient, supported by favourable demand conditions.
- Businesses remained confident about activity over the coming year, citing expectations of continued customer demand.
