Activities in Kenya’s private sector during the month of May defied the effects of above-normal rains witnessed to post the sharpest upward trend in activity recorded in 20 months.
- •The Stanbic Bank Kenya Purchasing Managers Index (PMI) points to an improvement in private sector business conditions in May, as falling cost burdens and rising new business contributed to a solid expansion in activity. Job creation continued at a mild pace.
- •During the month under review, input prices fell with respondents noting a decline in fuel prices and lower imports costs due to a more favourable exchange rate.
- •Output prices increased only slightly. Wage pressures remained prevalent as firms continued to hire because they foresee improved demand.
“Private sector activity was surprisingly strong in May, implying a further improvement in economic activity, as we had expected to see some impact from the recent floods. Output and new orders recorded strong gains in May as firms reported increased consumer demand.
“There were expansions in the services, manufacturing, and wholesale and retail sectors. However, heavy rains saw output declining in the agricultural and construction sectors,” noted Christopher Legilisho, Economist at Standard Bank.
“Job creation continued for a fifth successive month amid larger workloads and prospects of new business. Firms also purchased larger quantities, raising their inventory levels and improving their buffers.
Legilisho notes that though firms are positive about expectations over the next 12 months, this optimism is still well below the long-term average.
“Kenyan businesses remained more confident about future activity than at the start of the year, despite the degree of confidence slipping from April’s 13-month high. Growth projections partly reflected plans to open branches, purchase new vehicles and boost marketing spending.”
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