![[Kenya] Private sector activity records improvement, Stanbic Index](Images/2018/07/Nairobi economy.jpg)
[Kenya] Private sector activity records improvement, Stanbic Index
Latest survey data from Stanbic Bank Purchasing Managers’ Index™ signals a robust, albeit softer, improvement in business conditions across Kenya’s private sector in June.
This was signaled by sharp, albeit slower, rises in output and new business. In response to greater output requirements, firms raised their staffing levels at a solid pace. On the price front, input cost inflation eased to the slowest since October 2017, whilst output charges rose at a marked pace.
The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI™). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
Commenting on June’s survey findings, Jibran Qureishi, Regional Economist E.A at Stanbic Bank said:
“The private sector remains on a promising trajectory. In fact, the proposal in the FY2018/19 budget to repeal the interest rate capping law was a welcome development and indeed subject to approval by parliament, will unleash some much-needed private sector driven stimulus to the economy. Furthermore, while the portfolio investor community was clearly pleased with the government’s plan to consolidate public finances, there are still uncertainties as most of this consolidation is really banking on very ambitious revenue assumptions.”
The seasonally adjusted PMI fell further from 55.4 in May to 55.0 in June. Despite edging to the lowest since February, the latest reading pointed to a sharp improvement in the health of the Kenyan private sector.
The latest upturn was driven by a further rise in business activity during June. Despite softening to the slowest since January, the rate of growth was strong in the context of historical data. Anecdotal evidence pointed to greater inflows of new work and strong demand conditions.
In line with the trend for output, new business rose for the seventh consecutive month in June. Despite easing to the weakest since March, the rate of expansion was sharp and stronger than the series trend.
Meanwhile, new export orders rose during June. The rate of growth was sharp, but eased from the previous month. There were reports of strong demand in international markets for Kenyan goods and services.
In response to stronger demand conditions and greater output requirements, Kenyan private sector firms raised their staffing levels during June, extending the current sequence of jobs growth to seven months. Moreover, job creation accelerated from May’s five-month low to a solid pace.
Firms were encouraged to engage in input buying during June, thereby stretching the current period of expansion to seven months. Despite easing to the slowest since February, the rate of growth was sharp and above the long-run average. Recent increases in purchasing activity supported another sharp rise in pre-production inventories. There were reports that input stocks held by firms increased in line with higher output requirements.
As has been the case since February 2015, Kenyan private sector firms faced higher purchase costs during June. Although slowing to the weakest since last September, the rate of purchase price inflation remained sharp.
Food and fuel were among the key items that increased in price, according to panelists. In turn, this reportedly led firms to increase their average selling prices to pass on higher cost burdens to customers. The rate of inflation was marked and broadly similar to May’s three-month high.
