Stanbic Bank Kenya PMI - PMI rises to ten-month high in November

Key findings

• Fastest rises in output and new orders since May
• Employment growth at two-year high
• Weakest improvement in supplier performance for 18 months

The Kenya PMI pointed to a resurgence of growth across the private sector economy in November, as firms enjoyed a sharp increase in demand through the lifting of curfew measures. Stronger rises in output and new orders contributed to the fastest uplift in employment for two years, which helped firms to reduce their backlogs.

However, input costs continued to rise at a sharp pace, driving the quickest increase in selling prices since the beginning of the year, whilst confidence in future output remained historically weak.

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.

The latest reading of 53.0 in November was up from 51.4 in October to a ten-month high, signalling a solid upturn in the health of the private sector economy.

New orders rose steeply and at the fastest rate since May, which businesses often related to an increase in demand from the lifting of night-time curfew measures. This led to a solid upturn in activity that was also the strongest seen for six months.

Sector data suggested that the expansion was largely driven by the construction, services and wholesale & retail sectors. By contrast, agriculture and manufacturing posted a decline in output.

Meanwhile, private sector employment was reportedly boosted by higher sales, with latest data signalling the quickest rise in job numbers for exactly two years. The increase in staff capacity allowed firms to reduce their backlogs for the first time since May.

Input purchasing also rose to a greater extent in November, particularly as some businesses looked to stockpile goods amid expectations that demand will improve. However, there were increased reports of delays to supplier deliveries amid freight slowdowns and supply shortages. Subsequently, the overall improvement in vendor performance was the weakest in one-and-a-half years.

Supply shortfalls also contributed to a sharp rise in purchase prices during November, which panellists found was exacerbated by exchange rate weakness and higher taxes. Wage inflation and rising fuel prices meanwhile added to another marked increase in overall costs. The uptick in expenses led companies to raise their output charges at the fastest pace since January.

Despite a solid improvement in business conditions, output forecasts remained subdued in November, with just over a quarter of firms expecting activity to rise over the coming year.

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