Private sector activity slump may widen on falling orders

The agriculture boom may ease in the coming months, reducing new orders for various products, new data shows.

According to the Stanbic Bank Kenya Purchasing Managers’ Index (PMI) released yesterday, signs of reducing output in the private sector manifested in January, with the index falling marginally to 53.2 from 53.6 in December.

Any reading above 50.0 indicates growth. The survey found that the country’s private sector activity slowed slightly in January, hurt by a dip in the growth rate for new orders, although output rose.

“Owing to cyclical factors, private sector activity may soften somewhat over the next couple of months as growth broadly in the agriculture sub-sector eases,” said Jibran Qureishi, regional economist for East Africa at Stanbic Bank. Kenya has been enjoying a booming agriculture sector that lifted the gross domestic product (GDP) to six per cent in the third quarter on improved weather conditions.

According to the Kenya Bureau of Statistics, this was the highest third-quarter growth since 2015, rising faster than the 4.7 per cent recorded last year, on improved agriculture, construction, electricity and water supply.

The boost came especially from tea production, coffee sales and a 67 per cent increase in the production of fruit.

The Stanbic index noted that while output rose, purchase prices increased at the weakest pace in 16 months, due to the fall in fuel costs while food products were a key contributor to higher overall prices. Purchasing managers, the index noted, were no longer trawling up stocks to take advantage of lower prices, with the rise in input buying being the weakest in 13 months. This was reflected in a smaller increase in stocks, albeit one that was still marked.

Employment growth also remained modest in January despite a strong rise in orders.