Kenya’s private sector activity improved slightly for the first time in seven months of this year, attributed to the relatively calm political environment, the August Stanbic Bank Kenya Purchasing Managers Index (PMI) shows.
Kenya’s private companies increased production and placed new orders amid the greater political stability that has seen the setting up of formal talks between the Kenya Kwanza administration and the opposing Azimio political outfit.
Kenya’s headline PMI for August climbed to 50.6, up from 45.5 in July, indicating an expansion in business conditions for the first time since January. However, the index was only slightly above the 50.0 mark, indicating that the expansion was only marginal.
Whilst there was improvement in business conditions, this mild change was offset by price pressures. Indeed, raw material prices continued to rise at a historically strong pace, leading to the sharpest increases since June 2022.
After deteriorating at the sharpest rate in almost a year in July, firms recorded slight increases in production levels in August.
Private sector activity ticks up in August
Surveyed companies in Kenya noted that greater political stability had helped to boost demand and lead to higher activity, especially in the services and manufacturing sectors where growth resumed. Similarly, inflows of new work expanded over the course of August, bringing to an end a six-month sequence of decline.
However, the rate of growth was only fractional, as improvements arising from reduced political unrest and stronger demand conditions were almost completely offset by the negative impact of price increases.
Firms interviewed cited the high cost of raw materials and attributed this to the sustained weakening of the Kenya Shilling against the US Dollar, higher taxation, and an escalation in fuel prices at the pump.
As a result, the rate at which selling prices increased was also among the fastest seen since the survey began, rising to the highest level in over a year.
Businesses often reported having to keep margins stable by passing higher purchase prices through to clients. This latest PMI survey data signaled a quicker rate of job creation in August, as firms sought to build workforce sizes and support higher activity.
Likewise, the purchasing of raw materials grew for the first time in five months and to the greatest degree since January, leading to a renewed expansion in firms’ inventories.
Lead times on inputs meanwhile improved modestly and for the fifth month running. According to panelists, vendors often delivered items more quickly in a bid to improve cash flow.
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