Solid improvement in Kenyan business conditions in January

2019-02-05 00:00:00.0

Data collected 11-29 January

  • New order growth at four-month low...
  • ...but activity increases at quicker pace
  • Output price inflation sees marked fall

Operating conditions in Kenya’s private sector saw another solid uplift at the start of the year, despite the rate of improvement edging down from December. Output and new orders continued to expand sharply. Backlogs were reduced at the fastest rate in 14 months, while employment rose modestly. Output price inflation slowed as purchase cost pressures grew at a notably weaker pace.

The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI™). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

January recorded a drop in the headline PMI to 53.2, from 53.6 in December, to signal a weaker, but still solid improvement in business conditions at Kenyan private sector firms.

Commenting on January’s survey findings, Jibran Qureishi, Regional Economist E.A at Stanbic Bank said:

“Owing to cyclical factors, private sector activity may soften somewhat over the next couple of months as growth broadly in the agriculture sub-sector eases. However, despite these risks, lower international oil prices should help keep costs supressed for the private sector and thus underpin purchasing activity.”

The main findings of the January survey were as follows:

The slight fall in the headline index was partly due to a softer increase in new orders in January. The rate of growth eased to the least marked in four months, although it was still sharp overall. Meanwhile, new export orders increased at the sharpest rate since October, with many businesses reporting higher foreign demand.

Business activity at Kenyan companies continued to rise sharply, with the rate of output growth ticking up to a three-month high. Activity has risen in each month since December 2017. Firms were boosted by the influx of new business and stronger client bases. As a result, backlogs declined solidly and at the fastest rate in 14 months.

Employment growth remained modest in January, despite a strong rise in orders. Where workforce numbers did rise, panellists related this to new clients and branch openings.

Firms also cut back on purchasing activity growth in January, with the rise in input buying the weakest in 13 months. This was reflected by a smaller increase in stocks, albeit one that was still marked.

Lead times decreased at a more pronounced pace in January. Businesses found that suppliers showed strong response rates to input orders, often attributed to high competition in the market.

On the price front, firms increased average charges at the softest rate in 14 months in January, with data indicating a marked fall in the rate of inflation from December. The modest rise was linked to higher demand, although several firms reduced charges due to lower fuel prices.

Concurrently, input price inflation was softer in January than throughout last year. Purchase prices rose at the weakest pace in 16 months, due to the fall in fuel costs, while food products were a key contributor to higher overall prices. Salaries rose due to increased living costs, although the rate of growth was marginal and the least marked since last June.


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