Activity within Kenya’s private sector almost moved to the growth territory in January, save for weak client demand and cash flow problems which affected sales at many companies.
- The latest Kenya Purchasing Managers Index survey data pointed to a notable increase in export sales at Kenyan firms in January.
- The rate of growth accelerated for the fourth month running to the sharpest recorded in just over two years.
- Roughly a quarter of respondents saw a rise in new orders from abroad, with comments often highlighting a pick-up in demand from the UK and Germany.
Purchasing Managers’ Index readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration. The headline PMI rose to a five-month high of 49.8 in January, up from 48.8 in December, and was almost level with the 50.0 mark which signals a stabilisation.
The private sector businesses reported a rise in employment numbers at the start of the year, thereby ending a four-month run of decline. However, the rate of job creation was only slight overall. Firms noting an increase in staffing often cited the hiring of short-term workers as demand conditions stabilised and outstanding workloads rose.
“Agriculture, construction and service sector companies reported increased activity. However, there were further declines in manufacturing and the wholesale and retail sectors, with firms remaining under pressure from insufficient cash flow. Still, jobs increased in January as demand conditions stabilized. New export orders grew for an eleventh straight month as demand from the UK and Germany picked up, presumably due to Kenya’s weaker exchange rate,” said Christopher Legilisho, Economist at Standard Bank.
“Furthermore, Kenyan businesses reported stable inventories, with slower price increases in January. Evidently, price pressures have eased; input price inflation is now at its lowest level in over a year…surveyed firms still face pressure from both high import costs and taxation. The results indicate that business confidence for the year ahead is still subdued.”
Future output expectations were subdued in January, ticking down to their lowest since May 2023. Notably, just 10 per cent of businesses predicted a rise in output over the next year, citing efforts to increase projects, add services, boost marketing and open branches.