Stanbic Bank Kenya PMI - Weakest output growth for six months in December

Business conditions in the Kenyan private sector economy improved only modestly again in December, according to PMI survey data, following a sharp deceleration of growth in November. Notably, output rose at the slowest rate in six months, although new order growth quickened slightly. Higher employment supported the upturn in output, but business confidence fell to a new record low.

Meanwhile, cost pressures accelerated as firms faced difficulties acquiring some inputs amid sustained disruption from the coronavirus disease 2019 (COVID- 19) pandemic. Nevertheless, prices charged fell for the second month running.

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 headline PMI rose fractionally from 51.3 in November to 51.4 in December, to indicate another modest improvement in business conditions. The expansion was softer than those seen from July to October as the economy recovered from the COVID-19-led downturn.

Output rose at a slightly weaker pace in December, and the slowest seen in the current six-month sequence of growth. Firms found that improved cash flow, looser restrictions and higher customer orders supported the expansion. New order growth quickened from November, but remained far softer than October's record high.

Stronger sales led to a renewed increase in backlogs of work at the end of the year, which supported a third successive monthly rise in employment. The rate of job creation was marginal though.

Purchasing activity rose further in December, although stock levels increased at the slowest rate for six months. This was partly due to issues with global supply chains as a result of COVID-19 and input shortages. Notably, lead times improved at the weakest rate in seven months.

These supply-side issues also led to an accelerated pace of cost inflation, as purchase prices rose at the quickest rate since March. However, the uptick was eased slightly by a further decline in staff costs.

Despite some firms passing higher costs on to customers, average prices charged fell for the second month running in December. This was related to discount offerings by some firms amid efforts to attract new clients.

Business confidence slipped below November's previous record low at the end of the year. Despite positive forecasts from 22% of respondents, there were continued worries surrounding the impact of the COVID-19 pandemic on future activity.

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