Kenyan firms improved their sales, received more orders, and increased their output to meet rising demand in July, pushing the PMI Index to 54.2 points.
According to the index, opening intercounty borders in Nairobi and Mombasa led to a sharp rise in output and new business.
54.2 points in July, is the sharpest rise in the PMI index over the past 13 months compared to a contraction of 46.6 points in June 2020.
“Notably, the removal of county travel restrictions supported output and business sentiment in July, enabling firms to receive inputs much quicker, as supplier delivery times improved.
In any case, firms remain wary of the uncertain outlook, and thus future expansion plans are still not firmed up,” said Jibran Qureishi, Regional Economist E.A at Stanbic Bank.
Purchasing Managers’ Index™ (PMI™) readings above 50.0 signal an improvement in business while those below 50.0 show a deterioration.
Firms surveyed indicated that lifting of COVID-19-related restrictions helped to generate higher sales in July.
Firms also posted steep increases in export sales to meet new orders, especially from the European Union, a key destination for Kenya’s flowers and fresh produce.
Output levels were up at the start of the third quarter, the fastest since May 2018. It was also the first upturn for seven months, representing a partial recovery in activity since the depths of the COVID-19 pandemic.
Purchasing activity rose as firms looked to build up stocks and prepare for a return to normal level of demand.
Relaxed travel restrictions helped firms to receive inputs quicker than in June, as delivery times improved at the fastest rate in 16 months.
Purchase prices rose at a stronger, but still at a modest rate during July, amid numerous incidences of shortages in of some raw materials.
Consequently, firms raised output charges for the first time since March 2020.
Workforce numbers continued to fall in July, albeit at the weakest pace in the current five-month run of job shedding.
There were indications of slight pressure on capacity, while some panellists commented that workforces needed to expand.
Although business sentiments remain positive, several firms remain cautious over the uncertainty posed by the pandemic.