The December festive season activities saw Kenyan businesses record the sharpest rise in activity since February, leading to accelerated increases in output and employment, the latest PMI survey data shows.
The sustained improved activity saw the headline figure derived from the Stanbic Purchasing Managers’ Index (PMI) survey pick up to a three-month of 51.6 in December, rising from 50.9 in November.
It has remained above the 50.0 neutral mark for the fourth month running, signalling a modest improvement in business operating conditions.
“December PMI paints a positive picture for the Kenyan economy, in line with the series average. It comes as no surprise to see activity expand, perhaps due to favourable weather conditions and softer price pressures before a challenging 2023,” said Mulalo Madula, Economist at Standard Bank
The boost to growth was attributed to softening of inflationary pressures, as firms saw costs increase to the smallest extent in a year.
However, Surveyed businesses were subdued about the year-ahead outlook amid continued worries about global economic conditions.
The survey noted that new order inflows increased amid reports of improving demand conditions for businesses; the sales growth rate also quickened to a ten-month high and was solid overall.
Sectoral performances varied, with uplifts in agriculture, manufacturing, wholesale & retail contrasting with falls in construction and services. On the other hand, export growth dropped to a nine-month low.
Further, the PMI survey shows that Kenyan businesses made further additions to their staffing numbers in December, with the slight rate of job creation being the fastest seen since March.
Rising staff capacity allowed firms to deplete outstanding work for the second month in a row.
Companies also raised their purchasing activity at the end of the year, with the solid upturn leading to a further expansion of input stocks.
Vendor performance improved for the fourth month running, although greater demand pressures on suppliers meant that lead times were shortened only mildly.
“Positive news was also found on the prices side in December, as Kenyan firms saw input costs rise at the slowest rate for 12 months,” the survey noted.
Despite further reports of currency weakness and higher VAT, some firms noted that improving supply conditions, lower wage costs and stabilising energy prices helped to soften inflation.
Subsequently, companies raised their output prices to the smallest extent since August.
Despite improving business conditions, output expectations weakened again in December and were among the lowest on record.
Only 11 per cent of firms expect output to rise in 2023, with confidence remaining subdued amid concerns about the global economy.
“Going forward, businesses report only modest positivity, with 89 per cent of respondents anticipating no change in business activity over the next 12 months. As a result, inventory gains were moderate and concentrated in the agricultural sector, with declines recorded elsewhere,” Mulalo Madula.
Read also; Private Sector Rebounds in November as Sales Grow- PMI.
