Private sector activity grows for third consecutive month - survey

Shoppers at a supermarket along Aga Khan Walk, Nairobi, October 2021. [Wilberforce Okwiri, Standard]

Private sector activity grew for the third month in a row backed by higher demand for products, improved weather and reduced political noise.

Despite the renewed expansion in business activity, confidence levels among companies dropped sharply, with firms wary about global challenges.

This is according to a monthly survey by Stanbic Bank, which noted that companies hired at a faster rate on account of increasing orders both locally as well as for exports.

Stanbic’s Purchasing Managers Index (PMI) – which measures prevailing economic trends – shows business conditions improved for the third consecutive month.

Earlier, these conditions had contracted for five months in a row owing to factors such as the August General Election and a weak shilling.

Global factors such as the high oil prices and the Russian invasion of Ukraine also affected local activity.

Credit growth

The headline PMI stood at 50.9 in November, up from 50.2 in October. Readings above 50.0, according to Stanbic, signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

“The latest PMI data showed that business activity in Kenya continues to grow, albeit slowly, for the third consecutive month, corroborating other data such as private sector credit growth. Firms registered a marginal increase in output amid an increase in new business from domestic and foreign customers and favourable weather conditions,” said Mulalo Madula, an economist at Standard Bank.

“Still, rising input and output prices alongside monetary policy tightening has not caused a negative demand shock in nominal terms. The second rainy season, the 'short rains,' appears to be going better than previously forecast.

“A positive assessment of the 12-month outlook suggests that businesses expect improvement despite the expected challenging global economic environment.

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