From the recently released Stanbic Bank Kenya Purchasing Managers Index (PMI), a measure of economic health by surveying a panel of about 400 private sector companies, the month of August recorded a slight improvement in Kenya’s private sector activity, marking the first positive change in seven months. This improvement was attributed to the relatively stable political environment. According to the report, Private companies in Kenya increased production and generated new orders, benefiting from the greater political stability brought about by formal talks between the Kenya Kwanza administration and the opposing Azimio political outfit.
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During August, Kenya’s headline PMI rose to 50.6, up from July’s 45.5, indicating a marginal expansion in business conditions, the first since January. However, it’s worth noting that this expansion was only slight, as the index remained just above the 50.0 mark, signifying modest growth. Despite the improvement in business conditions, this subtle shift was, however, weighed down by rising price pressures. Raw material prices continued to increase at a historically strong pace, marking the sharpest rise since June 2022. After a significant decline in July, firms reported slight increases in production levels in August.
Companies surveyed in Kenya pointed out that the increased political stability had a positive impact on demand and overall activity, particularly in the services and manufacturing sectors, which resumed growth. Additionally, inflows of new work expanded in August, ending a six-month decline. Nevertheless, the rate of growth was minimal, as the positive effects of reduced political unrest and stronger demand were nearly offset by rising prices.
Firms cited the high cost of raw materials, attributing it to the continuous weakening of the Kenyan Shilling against the US Dollar, increased taxation, and higher fuel prices at the pump. Consequently, selling prices increased at one of the fastest rates since the survey’s inception, reaching levels not seen in over a year.
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To maintain stable margins, businesses often had to pass on higher purchase costs to their clients. The latest PMI survey data indicated an accelerated rate of job creation in August, as companies aimed to expand their workforce to support increased activity. Additionally, the purchase of raw materials grew for the first time in five months and at the highest level since January, resulting in renewed expansion in firms’ inventories. Lead times for inputs improved modestly for the fifth consecutive month, with vendors making efforts to deliver items more promptly to improve cash flow, according to panellists.
