Purchasing managers index reveals slow start for businesses

Customers buy pineapples in Kisii town on Jan 28, 2025. [Sammy Omingo, Standard]

Business conditions are improving rather sluggishly, according to the latest Stanbic Bank Kenya Purchasing Managers' Index (PMI).

The index recorded a score of 50.5 amid sustained higher commodity prices in January.

A PMI score of below the 50.0 mark shows a slowdown in business activities, while a reading above 50.0 indicates progress.

In December, the score stood at 50.6. The index is data collected from purchasing or inventory managers in businesses with a major focus on manufacturing, a key sector that determines economic performance.

These numbers reveal businesses are still cautionary about what the future holds even as the index shows optimism is low, with the future output index below the 50.0 mark.

Stanbic says the Future Output Index posted one of its lowest readings since the survey began 11 years ago, although it was slightly compared to December.

"Roughly six per cent of companies are hopeful of expanding their output over the next 12 months, with comments often revolving around new products and services and increased marketing activity," says Stanbic in the index.

The index notes falling staff numbers in the period and delays in payments for some firms despite businesses purchasing more inputs.

The purchase of more inputs is associated with backlogs in December, which businesses are still trying to deliver, higher selling prices and the uncertainty of the future.

"A number of firms chose to stock more inputs due to higher sales and concerns about future material availability according to qualitative reports," says Stanbic Bank.

"On the other hand, weaker order books at some companies led them to destock."

Christopher Legilisho, an economist at Standard Bank, noted the weaker pace of the Kenyan PMI, which he said reflects the resilience of the private sector. Firms, however, reported increases in both output and new orders, implying higher sales, more marketing, client referrals, and lower inflationary pressures.

"Firms were able to increase stocks purchased and inventories held - to cover higher sales as well as the future likelihood of difficulty in finding materials," said Mr Legilisho.

"Some firms nevertheless reported harsh economic conditions."

Stanbic Bank says growth momentum regarding output orders and new orders faded in the period.

"The latest data signalled that January's rise in output was the weakest recorded in the current four-month expansionary sequence and only marginal. Sales growth also eased to its slowest since last October," says the bank of the index.