Demand for exports in November fell to its weakest level since January, forcing firms to slow down on hiring as the rates of growth in output and new orders also dropped.
The latest Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) dropped marginally to 53.1 in November from 54.0 in the previous month, reflecting reduced new orders due to subdued exports demand.
The PMI survey, based on data from purchasing executives in about 400 private sector companies, says that even though operating conditions improved solidly last month, the rates of growth in output and new orders were marginally below those seen in October.
“—the rate of expansion was marginally slower than in October. Export demand also grew at a reduced pace, marking the smallest increase in new business from abroad for ten months,” the survey noted.
Firms lowered the pace of job creation, but at the same time raised purchasing activity at the sharpest pace since June, according to the PMI findings released on Wednesday.
Unlike in October when private firms raised employment at the fastest pace in six months as growth rebounded driven by higher output to accommodate new orders, November witnessed a gradual pace of growth in new jobs.
“Similarly, the rate of accumulation in backlogs of work eased to a three-month low, indicating that weaker demand growth had reduced the pressure on unfinished orders,” observed the survey.
This breaks the earlier trend where backlogs of work had risen for three successive months to October, giving room for more hiring.
Buying activity ‘still solid’
Vendor performance improved substantially in November, shortening delivery times at fastest pace since August. This was associated with high competition among suppliers.
Commenting on November’s survey findings, regional economist for East Africa at Stanbic Bank, Jibran Qureishi, said purchasing activity remains solid despite the slid drop in PMI index.
This, he explained, is pegged on costs remaining relatively muted despite the tough transport rules which had raised expenses earlier in the month as electricity and food prices declined.
“The aforementioned factors, in addition to lower international oil prices, should continue to keep costs suppressed for the private sector over the coming month and thus underpin purchasing activity,” he said.
Input price inflation cooled to a four-month low, after a relatively marked increase in the past few months. This, as staff costs increased marginally.
However, the enhanced enforcement of public transport laws saw purchase prices rise sharply. The survey said that firms who participated in the survey linked this to the rise in fuel and material costs.
“Several panellists in the transport sector raised charges because of the enforcement of new penalty fares,” noted the survey.
The PMI index is based on data compiled from purchasing executives drawn from diverse sectors such as agriculture, mining, manufacturing, construction, retail and services.
PMI above 50.0 signals improvement in private sector conditions from the previous month while readings below 50.0 indicate deterioration.