Kenyan private sector stabilises during April – Markit Economics

Following a deterioration in March, conditions in the Kenyan private sector broadly stabilised in April. A renewed increase in business activity, albeit marginal, and a sharp rise in new orders were central to the upturn in the health of the private sector. In response to higher output requirements, firms increased their payroll numbers at a modest pace amid reports of continued pressure on operating capacity. On the price front, charges rose modestly amid continued cost pressures.

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.

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.

Commenting on April’s survey findings, Jibran Qureishi, Regional Economist E.A at Stanbic Bank said: “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.”

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.