Activity in Uganda’s economy contracted for the first time in 20 months in March, according to an official survey, as a drop in money supply suppressed consumer demand.
The Stanbic Bank Uganda purchasing managers’ index, a measure of business activity in the private sector, fell to 49.3 for the month, down from 51.7 in February. A reading of below 50 indicates contraction compared with the previous month. The decline in business conditions is the first since July 2022.
The decline was the result of “renewed contractions in output and new orders, as customer demand was reportedly hampered by less money in circulation and reduced purchasing power,” according to S&P Global, the financial data company that compiles the index. Of the five sectors tracked, only industry recorded growth, it added.
Firms also reported a further rise in operating costs, reflecting an increase in input prices, in particular fuel, utilities, wood, and labour costs. This led to an increase in output costs for the twelfth consecutive month — despite the “subdued sales environment” — as businesses passed on higher costs to customers.
Hiring increased for the twelfth consecutive month, particularly in agriculture and services, but fell in construction and industry, partly supported by the positive outlook for demand and production in the coming year. This, together with the reduction in new orders, allowed companies to complete older orders, resulting in a decrease in backlogs.
“The anticipated growth in output also contributed to the latest expansion in input buying. Increased purchasing activity helped firms to replenish their pre-production inventories, which rose in March following a contraction in February,” the report said.
