Businesses & Financial News

Kenya’s private sector performance rises in August

By Steve Umidha

Kenyan firms saw a sustained improvement in performance in August as looser travel restrictions and slackening of Covid-19 infection cases led to a rise in output and new business.

The August Purchasing Managers’ Index (PMI) compiled by Stanbic Bank Kenya rose to 53.0 in the review month, higher than 54.2 in July, with the index suggesting that the rate of growth remained solid overall – and a second consecutive month of improving business conditions in the Kenyan private sector economy.

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

During that period, exports grew at a record rate, but job numbers fell amid efforts to cut wage costs, even though sentiment improved for the first time since February, but remained relatively weak.

Employment rate continued to fall in August, reflecting concerns that costs remained too high. The decrease in jobs was however, slightly faster than in July, but only marginal overall. Backlogs meanwhile rose at a modest rate.

Kenyan firms reported a sharp upturn in new orders during August, as the easing of coronavirus disease 2019 (COVID-19) related restrictions led to rising customer demand. The rate of expansion slowed from July’s recent high, but remained stable, according to the figures released yesterday.

“Notably, export sales growth reached a new record high, as the reopening of international travel supported an uplift in tourism. Firms also reported that new orders from Europe increased strongly,” reads in part the latest PMI’s readings by the firm.

The rise in demand reportedly helped businesses to expand and recover some output lost during the lockdown period.

Companies increased their purchasing activity solidly midway through the third quarter, amid efforts to build up stocks as firms anticipate demand will grow further in the coming months. Purchased items were delivered at a quicker pace, as lead times shortened for the third month running.

Higher input demand led suppliers to raise their prices during August, with the rate of purchase cost inflation accelerating to a four-month high. Fuel prices also increased at some companies. Equally, staff costs fell for the fifth month in a row, although at the softest pace.

As overall input prices rose, production costs were passed on to customers with a slight increase in selling charges. The rate of inflation slowed from July.

Kenya’s inflation was unchanged at 4.36 per cent year-on-year in August from a month earlier. On a monthly basis, inflation was 0.20 per cent from 0.08 per cent in July, according to the latest figures by the Kenya National Bureau of Statistics (KNBS)

The August PMI index showed that business expectations improved for the first time in six months in August, amid plans for new investment and branches. Sentiment remained relatively subdued though, ticking up only slightly from July.

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