The most recent Stanbic Purchasing Manager’s Index report on the business landscape in Kenya shows there is an emergence of a glimmer of positivity. The Purchasing Managers Index (PMI) survey for December 2023 suggests a favorable trend for businesses, instilling a sense of hope following a challenging period.
The survey signals a gradual yet optimistic shift towards stability. Despite the PMI score remaining below 50, indicating ongoing challenges, it rose from 45.8 in November to 48.8 in December. This indicates that businesses are encountering fewer difficulties compared to preceding months.
One contributing factor to this improvement is the alleviation of inflationary pressures. The December inflation rate registered at 6.6%, a decline from the previous month’s 6.8% and the lowest for the year. Costs for essential business elements and the prices they charge for their products or services have not escalated as sharply as before. While costs were notably high in October, the rate of increase slowed down in December, offering positive financial implications for businesses.
Surprisingly, despite the challenging economic climate, many businesses have witnessed an increase in customer purchases of their products or services during the surveyed period. This surge in customer spending helped counterbalance the impact of rising living costs, resulting in reduced declines in new orders, output, and employment.
However, the challenges are not uniform across all business sectors. Some, notably in agriculture, are thriving and even expanding their workforce. The agricultural sector was the sole sector experiencing a rise in staffing levels. Conversely, others, particularly in manufacturing and construction, continue to struggle due to elevated living costs and a decline in consumer demand for their products.
The survey also highlights a positive development: Kenyan businesses are exporting more products to other countries. This development is promising, presenting new avenues for business growth and expansion.
Despite the slight improvement in December, the outlook for future business activity in Kenya appears less optimistic. Confidence levels reached a seven-month low, with only 11% of respondents predicting growth in 2024. This reflects concerns and uncertainties among businesses, exacerbated by the aggressive depreciation of the Kenyan shilling, a significant contributor to the country’s inflation.
The PMI indicates a reduction in challenges, with some sectors even experiencing improvement. While concerns about the future persist, the positive indicators in the survey offer a sense of optimism as businesses navigate ahead.
