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Private sector output accelerates fastest in two years

Underpinning the improvement in the health of the private sector was a steep rise in business activity with the pace of expansion accelerating fastest in two years/FILE

NAIROBI, Kenya, Feb 5 – Operating conditions across the Kenyan private sector improved at a solid rate according to January survey data from Stanbic Bank’s Purchasing Managers’ Index.

Underpinning the improvement in the health of the private sector was a steep rise in business activity with the pace of expansion accelerating fastest in two years.

Falling slightly to 52.9 in January from 53.0 in December, the latest PMI reading signaled a solid improvement in business conditions that was slightly weaker than the prior month. Despite this, overall private sector growth was the second-strongest since December 2016.

Overall growth was underpinned by a steep and faster expansion in output, with the upturn in new orders also remaining strong, says Jibran Qureishi, Regional Economist at Stanbic Bank.

“Notably, the contraction we saw in the agriculture sub-sector in the first half of 2017 is likely to reverse in the half of 2018, which should subsequently provide tailwinds for other sectors to flourish,” says Qureishi.

Meanwhile, input cost inflation accelerated further to the fastest since September 2015, largely driven by higher purchase prices. This did not deter buying activity, however, which grew at the quickest rate since December 2016.

Output prices also increased strongly amid reports of more favourable demand conditions.

“The horticulture and floriculture sub-sectors should also perform well over the coming months largely underpinned by the ongoing recovery in the Eurozone as well as the recent appreciation of the EUR currency. We retain our GDP estimate for 2017 at 4.8% but we see a recovery to 5.6% in 2018,” adds Qureishi.

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