Stanbic Bank Kenya PMI for August 2023
Business Condition Improve for The First Time Since January
Key findings
Key findings
- Output and new orders increase slightly.
- Employment growth quickens amid improved outlook.
- Inflationary pressures remain at historic highs.
The August Stanbic Bank Kenya PMI pointed to a slight improvement in the health of the private sector for the first time in seven months, as output and new orders returned to expansion territory amid greater political stability. Job creation accelerated and purchasing activity picked up, whilst firms grew more confident about their output prospects. That said, the improvement in business conditions was only mild, and continued to be weighed down by elevated price pressures. Indeed, input prices continued to rise at an historically strong pace, leading to the fastest increase in selling charges since June 2022.
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. At 50.6 in August, up from 45.5 in July, the headline PMI signalled an expansion in business conditions for the first time since January. However, the index was only slightly above the 50.0 mark, indicating that the expansion was only marginal. After deteriorating at the sharpest rate in almost a year in July, output levels recovered slightly in August. Surveyed companies often noted that greater political stability had helped to boost demand and lead to higher activity, especially in the services and manufacturing sectors where growth resumed.
Similarly, inflows of new work expanded over the course of August, bringing to an end a six-month sequence of decline. However, the rate of growth was only fractional, as improvements arising from reduced political unrest and stronger demand conditions were almost completely offset by the negative impact of price increases.
Comment
Christopher Legilisho, Economist at Standard Bank commented:
"The August Purchasing Managers Index (PMI) implies economic growth recovering compared to July, as well as a likely positive economic performance in Q3:23. There was a notable expansion of output in August, specifically in services and manufacturing. New orders too ticked up in August, with export orders received by firms rising for a sixth straight month. Firms noted that improved food supply, increased marketing of products and a calm political environment supported new orders growth. Employment prospects remained promising as firms indicated hiring for a sixth successive month to complement existing teams and ramp up business activity.
Quantities purchased increased marginally, in line with output and new orders, while suppliers’ delivery times improved as vendors delivered items timeously to improve their cash positions. “However, tough business conditions and inflation pressures remain a pressing concern for Kenyan businesses, as input prices and staffing costs were seen rising due to a weaker exchange rate as well as higher taxes related to the recently enacted tax measures in the Finance Act.”