(Nairobi) – Kenya’s private sector activity saw modest growth in October, as the Stanbic Kenya Purchasing Managers’ Index (PMI) rose to 50.4 from 50.0 in September, signaling a marginal expansion in business activity. This was the second increase in output over the past three months, reflecting improvements in employment and output levels.
The PMI, which tracks key private sector indicators like output, new orders, and employment, is a key barometer for the country’s economic health. A PMI reading above 50 signals growth, while readings below 50 indicate contraction. The slight uptick to 50.4 indicates a stabilizing trend in the private sector, with output expanding slightly during October.
However, while there were some positive signs, business activity across various sectors remained mixed. Some sectors, including agriculture, construction, and wholesale and retail, saw growth, while others, such as manufacturing and services, reported declines. This highlights the uneven nature of the recovery in different industries.
According to Standard Bank Senior Analyst Mulalo Madula, the slight improvement in business conditions suggests that challenges faced in previous months are easing, albeit at a slow pace. “This improvement implies that the challenges faced in previous months are now easing, albeit slowly, setting the stage for economic recovery,” Madula said.
Despite the rise in activity, many businesses still face difficulties. Input cost pressures, although mild, persisted in October, contributing to slower increases in the average prices charged for goods and services. Firms continue to struggle with cash flow issues, high operating costs, and political uncertainties, which have hindered the pace of recovery.
While the overall increase in output was marginal, it led to a slight rise in employment levels, marking the first workforce growth since July. This growth allowed businesses to address backlogs of work and continue to build capacity. In fact, the volume of inputs purchased by businesses rose for the third consecutive month, as firms prepared for increased customer demand.
Businesses also increased their inventories, anticipating higher sales in the future. This was reflected in the fastest increase in stock levels observed in over a year. Confidence in future business activity reached a four-month high, with expectations for growth driven by new outlets, reoriented marketing strategies, and increased investment.
The growth in business optimism also pointed to a recovery in sales and client interest, particularly in agriculture, construction, and wholesale and retail sectors. However, the overall increase in sales remained modest, with many firms still grappling with tough economic conditions and rising costs.
In conclusion, while Kenya’s private sector has shown slight signs of recovery, the challenges of high operating costs and political uncertainty continue to affect businesses. With a mixed performance across various sectors, the outlook remains cautiously optimistic as firms focus on capacity building and expanding their operations in the coming months.
Table: Key Indicators of Kenya’s Private Sector Activity (October)
| Indicator | October Value | September Value | Notes |
|---|---|---|---|
| Purchasing Managers’ Index (PMI) | 50.4 | 50.0 | Indicates marginal growth in private sector activity. |
| Output Growth | Slight increase | No change | Output rose for the second time in three months. |
| Employment | Increased slightly | Declined | First growth in workforce since July. |
| Input Cost Pressures | Mild | Mild | Costs rose moderately, leading to slower price increases. |
| Sector Growth | Mixed | Mixed | Agriculture, construction, and retail grew; manufacturing and services declined. |
| Business Confidence | 4-month high | 3-month high | Optimism increased with expected future growth. |