Kenyan private sectors enjoy increase in output and new orders

A sharp increase in output and new orders, employment growth and a decline in cost inflation saw the private sector enjoy improved operating conditions during the month of December.

This is according to the latest Purchasing Managers’ Index (PMI) Survey by Stanbic Bank which indicates a 53.6 headline in December from November’s reading of 53.1.

The festive season saw the private sector cash in as Kenyans increased their purchase power.

At 53.6 in December, the headline Purchasing Managers’ Index rose from November’s reading of 53.1, signaling a solid advancement. Readings above 50 points signal an improvement in business conditions on the previous month, while readings below that show deterioration.

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New orders continued to rise sharply, with the pace of increase slightly faster than in November.

Similarly, export orders expanded at a substantial rate, indicating that firms were buoyed by an influx of both domestic and overseas demand.

Consequently, firms raised activity levels at a marked rate, although the latest increase was the softest in three months.

Employment growth also improved, while input buying expanded sharply. At the same time, cost inflation weakened to the least marked in five months, with output charges also seeing a softer increase.

According to Jibran Qureishi, Regional Economist E.A at Stanbic Bank, “… PMI closed the year strongly, recording the highest average since 2014. We believe that GDP growth remains on track to test 6.0% y/y in 2018 and furthermore the good weather conditions in Q4:18 will have underpinned the agrarian sector as well. Moreover, firms scrambled to clear backlogs of stock in December which subsequently boosted output, while surprisingly costs remained steady for firms during the festive season as well.”

Employment growth and supply chains maintained a strong efficiency, with delivery times decreasing at a sharp rate.

However, the rate at which purchases increased was the second weakest seen over the course of 2018. Where costs did rise, firms pointed to higher transportation and food costs, as well as a sharper increase in salaries.