Kenya private sector growth stabilizes in April, Index
Following a deterioration in March, conditions in the Kenyan private sector broadly stabilized in April, the Stanbic Bank - HIS Markit Purchasing Manager’s Index has shown.
At 50.3, up from March’s record low of 48.5, the seasonally adjusted PMI signalled a stabilisation in Kenyan private sector business conditions. Although above the 50.0 no-change mark, the latest figure was still the third-lowest recorded since the inception of the series in January 2014.
“Business activity recovered after a contraction in March primarily on the back of an increase in new orders. Indeed, domestic demand is showing some signs of recovery; however we would still urge caution for now considering that drought conditions could worsen as a result of the recent breakout of armyworms which could destroy the upcoming harvest. In addition, political risk is likely to remain elevated which could prompt the private sector to scale back on investment spending,
Underpinning the increase in output was a sharp rise in new orders. The rate of expansion quickened from March’s record low. According to anecdotal evidence, new orders had been boosted by improved client demand, which was further supported by marketing initiatives. Another factor leading total new work to rise was a sharp expansion in new export work, which reportedly occurred due to an increase in demand from international markets.
Work-in-hand continued to increase at the start of the second quarter. However, the rate of backlog accumulation was weaker than the average over the current 18-month sequence of expansion. According to panelists, stronger demand conditions and unavailability of funds led to greater work outstanding. In spite of greater backlogs, the pace of job creation was only moderate, continuing the trend observed so far in 2017.
Purchasing activity continued to rise in the face of stronger demand during April. Subsequently, stocks of purchases continued to accumulate. However, the respective rates of growth were modest and weaker than the series averages.
On the price front, firms signaled a renewed increase in output charges as firms were able to pass on higher cost burdens to clients amid reports of stronger demand conditions.
Latest data pointed to the twenty-seventh consecutive rise in purchase costs. The rate of inflation was solid overall. Staff costs also continued to rise in April.