Private sector activity jumps in June

The private sector activity jumped in June, helped by increased local and external demand for goods, a survey showed on Wednesday, and it was seen improving further after government departments pay their outstanding bills.

The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) for manufacturing and services rose to 54.3 in June from 51.3 in May and was its highest in 10 months. Any reading above 50 indicates growth.

“Alongside the sharp increase in new orders, firms stated that new government spending plans should help business growth over the year. Many panellists also reportedly intend to open new branches in the near future,” the survey said.

Private sector activity was also expected to get a further boost from the government paying its arrears owed to companies.

“The commitment to clear private sector arrears in the FY2019/20 outlined in the budget speech, should underpin economic activity if implemented in the second half of 2019,” said Jibran Qureishi, Regional Economist for East Africa at Stanbic Bank.

Finance Minister Henry Rotich said in his 2019/20 (July-June) budget speech last month that the government had made it a priority to pay 10.9 billion shillings owed to its suppliers by the end of June.

The Kenya National Bureau of Statistics said last week the economy grew 5.6 per cent year-on-year in the first quarter from 6.5% in the same quarter last year, due to dry weather which curbed the farming sector.

- Detailed PMI data are only available under licence from IHS Markit and customers need to apply for a licence.