December survey completes strong year of growth for Kenya, Stanbic Bank report
10-01-2019 10:22:00 | by: Pie Kamau | hits: 5038 | Tags:

Kenyan private sector businesses enjoyed a solid improvement in operating conditions during the month of December, 2018. Output and new orders recorded further sharp increases.

Employment growth also improved, while input buying expanded sharply. At the same time, cost inflation weakened in the five months, with output charges as well as a softer increase.

The headline figure from the survey is the Purchasing Managers' Index ™ (PMI ™). Readings above 50.0 signal improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

Commenting on December's survey findings, Jibran Qureishi, Regional Economist EA at Stanbic Bank said:

"The Stanbic PMI closed the year strongly, recording the highest average since 2014. We believe that GDP growth remains on track to test 6.0% y / y in 2018 and furthermore the good weather conditions in Q4: 18 will have underpinned the agrarian sector axis well. Moreover, firms scrambled to clear backlogs or stock in December which then boosted output, while surprisingly costs remained steady for firms during the festive season as well. "

The main findings of the December survey were as follows:

At 53.6 in December, the headline PMI rose from November's reading of 53.1, signaling a solid advancement in Kenya's private sector economy. The latest survey confirmed that the PMI reading was the strongest since 2014.

New orders at Kenyan businesses continued to rise sharply, with the pace or increase slightly faster than in November. Similarly, export orders expanded at a substantial rate, indicating that firms were buoyed by influx or domestic and overseas demand.

Accordingly, firms raised activity levels at a marked rate, although the latest increase was the softest in three months. Moreover, firms were capable of raising activities in the business of Confidence Copyright © 2019 IHS Markit Ltd Page 2 of 3 since July. Panelists reported a concerted effort to clear backlogs.

Staffing levels recorded a modest rise during December. Employment growth was driven by an increase in casual workers in line with the rise in new orders. Alongside this, supply chains maintain a strong efficiency, with delivery times decreasing at a sharp rate.

Purchasing activity grew substantially during December, due to the further expansion in new orders. However, the rate at which was increased was the second-weakest over the course of 2018. Likewise, stocks of purchases rose at a slower, but still marked, pace.

On the price front, Kenyan private sector firms reported a softer rise in overall input prices in December. In fact, the pace of increase was at a five-month low, with only around 14% or panelists seeing costs increase.

Where costs did rise, firms are pointing to higher transportation and food costs, as well as a sharper increase in salaries. Staff costs rose as companies reported dividing out profits from the recent sales growth.

Finally, companies responded with a softer markup in output prices during December, as the respective index fell to its lowest since August. Despite the increase in demand, respondents found that they were able to price inflation at the end of the year.