[Kenya] Purchasing Managers’ Index highest in a year as political situation stabilizes, report
08-01-2018 13:32:23 | by: Bob Koigi | hits: 51323 | Tags:

Business conditions improved for the first time in eight months amid reports of greater political stability. Growth was underpinned by expansions in output, new orders, stocks of purchases and employment, thereby reversing the recent downward trend.

On the price front, firms continued to face intense cost inflationary pressures. Subsequently, firms raised their average selling prices which they linked to the pass-through of higher cost burdens to clients.

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.

Rising to 53.0 in December from 42.8 in November, the latest PMI reading signalled that the Kenyan private sector economy returned to expansion territory. The reading was consistent with a solid improvement in the overall health of the sector, and one that was the strongest since December 2016.

Commenting on December survey findings, Jibran Qureishi, Regional Economist E.A at Stanbic Bank said:

“The Stanbic PMI rose above the 50.0 level mark for the first time since April as the private sector began to benefit from political stability. Looking ahead, we remain optimistic that growth will recover over the coming year supported by the agriculture and tourism sector, while a resumption in public spending will also add some much needed stimulus.”

The upward movement in the headline index was supported by a rise in business activity for the first time in eight months during December. Furthermore, the rate of expansion was the fastest since September 2016 and sharp overall. Panellists reported that reduced political tensions and improved customer demand were the key factors behind greater output.

New business at Kenyan private sector companies rose for the first time in five months during December. Furthermore, the rate of growth was the strongest in nearly a year. There were reports that a less heated political climate led to a greater customer turnout.

Mirroring the trend for new orders, new export orders rose for the first time in five months amid reports of greater international demand for Kenyan products. Moreover, the rate of expansion was sharp and the fastest since December 2016.

In response to greater output requirements (and subsequent capacity pressures), firms increased their payroll numbers during December. That said, the rate of jobs growth was only marginal.

On the price front, the Kenyan private sector faced greater overall input costs. Moreover, the rate of input price inflation intensified to the sharpest in 26 months. Anecdotal evidence pointed to a general rise in raw material prices. Meanwhile, the private sector saw a renewed increase in average selling prices following a marginal decline in November.

Panelists attributed higher output charges to the pass-through of higher cost burdens to customers amid supportive demand conditions. The rate of output charge inflation was the fastest in a year and solid overall.

Reversing the downward trend in purchasing activity, input buying rose for the first time in five months during December. Subsequently, firms added to their pre-production inventories, thereby ending a four-month sequence of depletion. Overall, the rate of accumulation was the most pronounced since January.