Kenyan companies raise output following increased demand in the last quarter of 2017

Youth escape from teargas during a demonstration in Nairobi last year; prolonged political activities affected most Kenyan businesses in 2017

NAIROBI, KENYA: Business confidence rose in December 2017 as the political situation in the country stabilised, the latest purchasing managers index (PMI) shows.

PMI, one of the widely accepted barometers for the health of the private sector, went up to 53 after a charged political season that saw the reading plunge to a low of 34.4 in October.

Readings above 50 signal an improvement in business conditions on the previous month, while readings below that show a deterioration. The index slipped below the 50-mark in March 2017.  

The improved reading in the period under review was buoyed by the sharpest increase in output since September 2016.

In addition, there was a marked increase in new orders for the first time in five months, signalling recovery of the economy that had been battered by heightened political activities.

“The Stanbic PMI rose above the 50.0 level mark for the first time since April as the private sector began to benefit from political stability,” said Stanbic Bank’s regional economist for east Africa, Jibran Qureishi.

He was optimistic that growth would recover in 2018 supported by agriculture and tourism, with resumption in public spending adding ‘much-needed stimulus” into the economy.

 “Business conditions improved for the first time in eight months amid reports of greater political stability. Growth was underpinned by expansions in output, new orders, stocks of purchases, and employment, thereby reversing the recent downward trend,” read the survey.

The data for the survey was collected between December 5 and December 19.

New export orders also rose for the first time in five months amid reports of greater international demand for Kenyan products, said the survey.

“Moreover, the rate of expansion was sharp and the fastest since December 2016,” said the survey.

Employment also went up as more orders were made.

“In response to greater output requirements (and subsequent capacity pressures), firms increased their payroll numbers during December,” said the survey by Stanbic.

But the authors of the survey were quick to note that “the rate of jobs growth was only marginal”.

It will be interesting to see whether this confidence will result in faster economic growth in the fourth quarter of 2017.

The gross domestic product, the total value of goods and services produced in a given period of time, slowed to a five-year low between July and September last year as electioneering affected the economy.

The economy grew at 4.4 per cent in the third quarter compared to 5.6 per cent registered in a similar period in 2016. The last time the growth slowed down to such levels was in the third quarter of 2012, when the country recorded a 4.4 per cent growth.