Uganda retains PMI crown despite business activity’s falling to 10-month low

Uganda remained Africa’s top-ranked economy on the Purchasing Managers’ Index (PMI) for a second consecutive month in January, even as overall business activity slowed to its weakest level in 10 months, according to a BusinessDay analysis of the latest S&P Global survey.

The headline PMI eased to 52.6 in January for the East African nation, down from 54.0 in December, but stayed above the 50.0 no-change threshold, signalling continued improvement in private-sector conditions at the start of 2026. Readings above 50 indicate expansion from the previous month, while those below 50 point to contraction.

“Rising customer numbers supported a further increase in new orders during January, in turn underpinning an expansion in business activity,” the report said. “In both cases, growth was recorded for a twelfth successive month. There were some reports, however, that the election period had hampered operations.”

Survey signals continued expansion across sectors

The Stanbic Bank Uganda PMI is compiled by S&P Global using questionnaire responses from roughly 400 private-sector companies spanning agriculture, mining, manufacturing, construction, wholesale, retail, and services.

Data collection began in June 2016, with responses gathered in the second half of each month to measure directional changes from the previous month. The composite index is calculated as a weighted average of new orders (30 percent), output (25 percent), employment (20 percent), suppliers’ delivery times (15 percent), and stocks of purchases (10 percent).

Output expanded across all five broad sectors covered by the survey, prompting firms to increase hiring in January, often on a permanent basis.

“Higher output requirements encouraged companies in Uganda to take on extra staff in January, with firms often reporting that workers had been hired permanently,” the report added.

Agriculture was the only sector to record a decline in employment. Elsewhere, workforce expansion pushed staff costs higher, contributing to a renewed uptick in inflation after a decline in December.

Inflation remains contained as central bank holds stance

Uganda’s annual headline inflation rose marginally to 3.2 percent in January from 3.1 percent in December, driven by rising service and energy costs despite easing food prices. Core inflation, which excludes volatile items, rose to 3.3 percent.

The Bank of Uganda has maintained a cautious policy stance, keeping its benchmark rate at 9.75 percent since August in a bid to contain inflationary pressures while supporting growth.

“Higher input prices were likely due to greater utilities and some raw-material costs, while purchase costs and output charges rose again,” said Christopher Legilisho, economist at Stanbic Bank.
“Inflation pressures seem muted; inflation was up to just 3.2 percent year on year in January 2026.”

Structural growth story underpins resilience

Uganda’s resilience in the PMI rankings reflects broader macroeconomic stability rooted in decades of structural reform. The country has evolved from near-economic collapse in 1986 into a steadily growing, market-oriented economy supported by agriculture, natural resources, and a rapidly expanding young population.

With GDP estimated at roughly $61.3 billion in the 2024/25 fiscal year, policymakers aim to transition Uganda into lower-middle-income status, leveraging oil development, fertile land, and regional trade integration.

Economic rehabilitation began after Yoweri Museveni’s National Resistance Movement took power in 1986, ushering in IMF- and World Bank-backed reforms including privatisation, foreign-exchange liberalisation, and infrastructure rebuilding. Over the past five years, the economy has averaged more than five percent annual growth, recovering from pandemic-era disruptions.

Firms remain optimistic despite slowdown

Despite last month’s moderation in business activity, corporate sentiment remained positive. Roughly three-quarters of surveyed firms expect output to rise over the next 12 months.

“Confidence often reflected expected improvements in customer demand, with some firms also predicting a pick-up in activity following the election period,” Stanbic Bank said.