The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) for August shows a significant easing in the contraction of private sector business conditions, hinting at a potential recovery after a difficult July.
The headline PMI rose to 49.4 in August, up from a 12-month low of 46.8 in July. While still below the 50.0 mark that signals growth, the increase indicates a much softer decline in business activity.
The survey, which was conducted between August 12-27, found that:
- New orders and output saw a much softer reduction, with some businesses reporting a pick-up in sales as the economic environment improved following recent disruptions.
- The reduction in purchasing also eased, and inventories saw a slight increase after a dip in July.
- Employment levels continued to rise, with job creation reaching its fastest pace in 15 months. This helped firms reduce their backlogs for the third consecutive month.
- Supplier delivery times improved notably, marking the fastest reduction since October 2021 due to increased competition.
Despite a marked rise in overall costs, Kenyan businesses are showing increasing confidence in the future. Business sentiment reached its highest level in two-and-a-half years (since February 2023), as companies expressed optimism that new marketing efforts and product offerings would drive growth.
Christopher Legilisho, an economist at Standard Bank, commented on the findings, noting the improvement in operating conditions.
Input costs for businesses rose solidly in August, largely driven by wage pressures and higher taxes, particularly on items like fuel. However, companies only marginally increased their output prices, the smallest increase in 12 months, as they focused on stimulating a recovery in demand.