- Stanbic PMI Report shows that purchasing efforts accelerated in October, leading to the greatest upturn in inventories since August 2023.
- PMI readings below 50 signals a decline in month-on-month private sector activity, while levels above point to growth.
- While tax payments and higher material prices drove expenses up at several firms, reduced fuel prices partly countered this.
Kenya’s private sector activity improved marginally in October, boosted by a rise in employment and growth in output, according to the Stanbic PMI Report. The Stanbic Kenya Purchasing Managers’ Index (PMI), which measures the performance of key private sector indicators such as output, new orders, and employment, rose slightly to 50.4 in October from 50.0 in September.
PMI readings below 50 signal a decline in month-on-month private sector activity, while levels above point to growth. The index shows that activity in the review period expanded amid a broad stabilization of new work, while employment increased for the first time in three months.
Purchasing efforts accelerated, leading to the greatest upturn in inventories since August 2023.
Read also: Kenya’s private sector activities rise as input costs continue to ease
Kenya’s job growth
However, Standard Bank Senior Analyst Mulalo Madula says that despite the increase, there is a cautiously optimistic outlook for the Kenyan private sector as business activity and employment levels returned to growth in October.
“This improvement implies the challenges faced in previous months as now easing, albeit slowly, setting the stage for economic recovery,” said Madula.
Input cost pressures remained mild, prompting a slower increase in average prices charged. The reading signalled a renewed but marginal upturn in the health of the private sector, with output, new orders and employment all moving into expansion.
Total output at Kenyan businesses rose for the second time in three months during October, albeit only slightly overall.
Whilst a third of firms surveyed saw their activity increase since the prior month, this was largely offset by declining activity at 29 per cent of panellists.
Stanbic PMI Report
Sector data further muddied the picture, as expansions in agriculture, construction, and wholesale and retail were countered by decreases in manufacturing and services.
“The increase in output, driven by a broad stabilization of new orders, underscores the resurgence in sales and client interest, particularly in sectors such as agriculture, construction, and wholesale & retail. However, growth was tempered by declines in manufacturing and services, highlighting the mixed performance across the sectors,” added the Senior Analyst.
According to surveyed businesses, rising sales and greater client interest drove the increase in activity in October.
That said, the overall sales uplift was only fractional, as many firms continued to struggle with cash flow constraints, challenging economic conditions, rising costs, and political uncertainty.
Read also: Inflation and energy costs curtail Kenya’s private sector growth
Greater spending
The slight rise in output at Kenyan firms led to a similarly mild uptick in employment levels. Nonetheless, this marked the first instance of workforce growth since July, which allowed for a fresh depletion of backlogs of work. Capacity building in October also included purchases, as the volume of inputs bought rose for the third month running.
Businesses meanwhile stocked more inputs in anticipation of new customers. Inventories rose at a modest pace that was the fastest observed in just over a year. Greater spending by firms partly reflected a pick-up in output expectations at the start of the fourth quarter.
Confidence regarding activity in the year ahead rose to a four-month high, with new outlets, reoriented marketing strategies, and greater investment often cited as expected growth drivers.
That said, sentiment remained subdued when compared with historical trends. Despite increased hiring and purchases, Kenyan firms continued to see a mild rate of input cost inflation.
While tax payments and higher material prices drove expenses up at several firms, reduced fuel prices partly countered this.
Cost burdens were particularly weak compared to last year’s. As a result, average prices charged rose only marginally.
Notably, a softer rise in August and a drop in April marked the only instances in almost four years where inflationary pressures on selling charges have been cooler.
