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Kenya’s private sector growth eases to four-month low in October

 

Nairobi: November 3, 2016: Kenya’s private sector eases to four-month low in October, according to the latest Stanbic Bank Purchasing Managers’ Index™ (PMI™) data released today. 

Business conditions improved only modestly, with output and new orders rising at relatively subdued rates. The pace of growth in new work, however, remained robust overall, helping both employment and input stocks to rise solidly and suggesting confidence about the near-term outlook.

“The PMI fell to a four month low in October as domestic demand evidently seems to have cooled off. New export orders rose at its fastest pace in six months, hence the fall in output was clearly related to conditions in the domestic market,” said Jibran Qureishi, Regional Economist E.A at Stanbic Bank said. “We remain cautious about agriculture output over the coming months owing to weather reports of uneven rainfall in the key food growing counties. Moreover, the slowdown in private sector credit growth also poses as a downside risk to the promise of the private sector.”

Broadly stable charges reflected efforts at some firms to stimulate demand, although other companies raised their selling prices amid rising costs. The seasonally adjusted PMI dropped to a four-month low of 52.0 in October, from 53.5 in September, signaling a slowdown in private sector growth, and was close to the record low seen in June (51.5).

The rate of expansion in output was modest and in line with the overall improvement in business conditions. Activity had risen at the fastest pace since February during September, but the latest increase was the least marked in four months. New business rose at a comparatively sharp pace in October. However, the rate of growth was also the weakest in four months and below the series average.

Rising exports contributed to the expansion of total new work. The respective index climbed to a six-month high. The overall improvement in demand was sufficient to lead to another marked rise in purchasing activity during October. The pace of expansion eased only slightly from September’s seven-month high. Input also eased, rising at a slower but still robust rate. Likewise, the rate of job creation remained close to that seen in September. With growth of new business outstripping that for output, backlogs of work continued to rise sharply. Strong capacity pressures have been evident throughout 2016 to date.

On the price front, input costs rose only modestly while charges remained broadly stable. Some companies’ output prices reflected higher costs, whereas others offered discounts aimed at securing new clients.

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