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PMI at 27-month high

PMI at 27-month high

Data collected 12-26 April

• PMI Index at 56.4 in April

• Rate of output growth accelerates to a survey-record high

• Input cost inflation eases to the weakest in six months

Operating conditions across Kenya’s private sector improved to the greatest extent since January 2016 in April. Output growth accelerated and was the sharpest in the survey’s 52-month history, while the latest rise in new orders quickened to the fastest since the end of 2016. In response to sustained output growth, firms were encouraged to raise their staffing levels at the strongest pace since December 2016. On the price front, input cost inflation remained sharp despite easing to the weakest since October 2017.

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.

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

“The strength of the recovery in private sector activity continued last month. This shows that the underlying demand conditions in the economy are consistent with a solid recovery in economic activity. Thus far, this strength in activity has not been associated with any noticeable inflation pressures. But there are reasons for some caution. The combination of rising demand, both domestic and external, with rising input costs and rising employment have the potential to exert meaningful and durable upward pressures on inflation. Nonetheless, the rates of input and output price inflation eased further from February’s recent high.”

The main findings of the April survey were as follows:

The seasonally adjusted PMI rose from 55.7 in March to 56.4 in April. This suggested that the health of the private sector improved to the strongest extent since January 2016. Notably, the latest reading outstripped the historical average of 52.8.

Business activity rose at the start of the second quarter, thereby extending the period of expansion to five months. Moreover, the latest upturn was the sharpest recorded since the inception of the series. Stable economic conditions and greater volumes of incoming new business were the key factors behind output growth, according to panellists.

In line with the trend seen for business activity, new orders rose for the fifth consecutive month during April. Moreover, the rate of expansion accelerated to the fastest since December 2016. Anecdotal evidence pointed to strong demand from both domestic and external markets. At the same time, despite softening from March’s survey-record, new export orders rose at a sharp pace.

A back-to-back monthly rise in backlogs was registered at the start of the second quarter. Moreover, the rate of accumulation was solid and accelerated to the fastest since last May.  Respondents reported that greater inflows of new work was behind the latest increase in outstanding business.

Concurrently, companies raised their staffing levels in April. Moreover, the rate of job creation was solid and the strongest reported since the end of 2016.

 

As has been the case since December 2017, firms raised their input buying during April. Moreover, the rate of expansion accelerated to the most pronounced since the series began in January 2014. Subsequently, pre-production inventories rose at a sharp pace despite softening from March’s recent high. According to respondents, stocks increased in tandem with favourable demand conditions.

Meanwhile, input costs faced by Kenyan private sector firms rose during April, thereby extending the current sequence of inflation that began in February 2015. Despite easing to the weakest since last October, input cost inflation remained sharp and marginally above the historical average. According to panellists, US dollar strength contributed to higher imported costs for raw materials, with prices for fuel and food items also reportedly up since March.

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