Kenyan Private Sector Sees Significant Expansion in Oct.– PMI
Business activity in the Kenyan private sector expanded markedly in October, according to the latest survey data, as companies highlighted a further improvement in sales intakes amid broader economic strengthening.
According to Stanbic IBTC purchasing manager index (PMI) released by S&P Global, rising demand encouraged firms to increase their purchasing activity for the first time since April.
The improved economic environment was also supported by a milder increase in business expenses, with input costs rising at the slowest pace in just over a year.
The PMI registered in expansion territory for the second month running in October. At 52.5, up from 51.9 in September, the index signalled a solid improvement in overall operating conditions.
Notably, this was highest that the index has been since February 2022. The PMI survey indicated a further rebound in the Kenyan private sector following the disruptions caused by protests in the second quarter of the year.
Output and new business intakes increased for the second consecutive month, with both growth rates accelerating. In terms of output, the latest expansion was the strongest since December 2021.
Firms cited robust demand conditions amid improving economic prospects, along with the impact of new product launches and promotional pricing strategies.
Notably, all of the main sectors monitored by the survey experienced an upturn in activity in October. This contributed to a broad-based increase in input procurement, with total purchasing activity rising for the first time since April.
There were also some initiatives to enhance workforce capacity, although the pace of job creation was only marginal. Kenyan businesses reported relatively stable conditions regarding supply chains and price pressures at the start of the fourth quarter.
Lead times shortened for the ninth consecutive month, with panellists often attributing efficiency gains to subdued input demand in recent months and increased vendor competition.
However, the pace of improvement eased from September’s four-year high. With purchases increasing and delivery times improving, Kenyan firms were able to expand their input inventories during October.
Regarding prices, firms indicated that input costs rose in October, but only marginally. In fact, the overall rate of inflation was the slowest in 13 months, with both purchase prices and overall wage costs increasing at a slower pace than in September.
When cost increases were reported, businesses mainly cited a combination of rising import prices and higher taxes, including increases in VAT and fuel duties.
Output prices also increased, but the rate of growth was similarly modest. Notably, the wholesale & retail sector was the only one to see a noticeable uptick.
Several firms mentioned offering discounts to attract sales as economic activity improved. Finally, output expectations dipped to a four-month low in October, yet they remained among the strongest since early 2023.
S&P said exactly 20% of survey respondents forecasted an increase in activity by October next year, while the rest maintained a neutral outlook for the private sector.
Commenting, Christopher Legilisho, Economist at Standard Bank said, “Kenya’s private sector in October saw both output and new orders up sharply as conditions improved for consumers and firms benefited from softer inflation.
“Firms ramped up quantities purchased and increased inventory levels, expecting higher consumer demand. They also reported quicker deliveries reflecting increased efficiency and vendor competition. However, firms were less optimistic about future output conditions.
“Employment was stable in October for most firms as they maintained their workforce, while backlogs shrank as they cleared outstanding orders.
“Pricing indicators were soft in October, as input prices, purchase prices, staff costs and output prices increased only modestly. Low prices pressures imply that, while output conditions have improved, they are not fueling demand-driven inflation.” MTN Nigeria Lost 8.3% Ahead of Interim Dividend, Potential Offer
