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Economic activity accelerates in August but fuel tax a threat: Stanbic index

Stanbic Economist cautions that VAT on fuel will have a notable second-round impact on the economy.

NAIROBI, Kenya, Sep 5 – Operating conditions across Kenya’s private sector improved at a marked pace during August, with purchasing activity extending a nine-month trend.  

The monthly Purchasing Manager Index shows companies have raised their staffing levels during August although firms faced the fastest rise in overall input costs since February.

Stanbic Bank Regional Economist, Jibran Qureishi, says the recovery in output and new orders helped counterbalance cost pressures that have re-emerged over the past couple of months.

However, Qureishi cautions that VAT on fuel will have a notable second-round impact on the economy.

“Authorities may soon come to terms with the fact that painful tax measures are symptomatic of excessive and unrelenting expenditures,” said Qureishi.

The rate of expansion accelerated from July’s recent low and was sharp overall. Higher inflows of new orders reportedly boosted output.

New orders also rose for the ninth consecutive month in August. The rate of growth quickened from July’s six-month low and was stronger than the trend seen for the current sequence.

Meanwhile, new export orders continued to rise. Despite softening from July’s four-month high, the latest upturn was sharp overall.

As has been the case since December 2017, Kenyan private sector companies raised their payroll numbers in August. Panellists associated higher employment with increased output requirements. Despite quickening from the preceding month, the rate of expansion remained modest.

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