NAIROBI, Kenya, Oct 5 – Kenya’s private sector activity rebounded for the first time in six months in September as businesses recorded increased activity following the end of the election season.
The uptick in activity saw the headline figure derived from the Stanbic Purchasing Managers’ Index™ (PMI) survey improve to 51.7 in September from 44.2 in August.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
The figure has remained below the 50.0 no change mark since March as business activities remained subdued.
“Kenya’s business conditions saw a renewed uptick in September as concerns over post-election disruptions faded. Firms have signaled a strong rebound in output, while the sharp increase in demand also meant firms stepping up purchasing activities and stockpiling, with some firms emphasizing concerted efforts to avoid future shortages,” said Mulalo Madula, Economist at Standard Bank.
According to the survey, an improvement in supply chains during the month encouraged firms to purchase more inputs.
Even so, employment was largely stable amid ongoing concerns about the cost-of-living crisis
Cost pressures were particularly lifted by higher fuel prices in September, which led to an accelerated uptick in firms’ selling charges.
The survey notes that output levels returned to growth for the first time since February, increasing at a solid pace.
Expansions were seen in the agriculture, wholesale & retail, and services categories, whereas declines were registered in manufacturing and construction.
The upturn in new orders encouraged businesses to raise their purchasing activity sharply in September, in line with a shortening of input lead times following election-led delays in the previous month.
Stocks of purchases rose accordingly and at the strongest rate since April.
Despite improving slightly, the outlook for future activity remained subdued in September, amid ongoing concerns surrounding the cost-of-living crisis.
Expectations at Kenyan firms for the next 12 months remained one of the worst on record, with just 12 per cent of panellists predicting output to expand. Job creation was weak as a result, with employment numbers rising only fractionally.
Madula noted that recovering demand, coupled with phasing out of fuel subsidies, will likely exert inflationary pressure.
“A second round of inflationary pressure could persist into 2023 due to higher electricity prices, higher domestic fuel pump prices and the excise duty hike from October. In fact, this could restrain consumer spending in the near term,” he said.
