Kenya’s private sector remains in solid growth territory in July – PMI report

The Latest Purchasing Managers’ Index™ (PMI™) data released by CfC Stanbic Bank indicate that Kenya’s private sector lost some growth momentum in July, as business conditions improved at the weakest pace in four months.

However, the overall rate of expansion remained solid, driven by further rises in both output and new orders. Employment also contributed to growth of the sector as a whole, with the rate of hiring little-changed from June’s solid pace.

Commenting on July’s survey findings, Jibran Qureishi, Economist at CfC Stanbic Bank said: “The third quarter of the year has started off rather slowly as the PMI fell to 54.1 in July, which is lower than the 55.5 average recorded in the second quarter although slightly better than first quarter average of 53.9.”

Mr. Qureishi further noted that new order growth fell to a six-month low, while cost pressures intensified to a 16-month high predominantly due to the pass through effects of the weaker Shilling.

“We, however, feel the regulator has been pre-emptive in addressing the concerns around the currency thus far, and if the much needed stability materialises from their actions, the recent cost pressures that have been slowing down growth are likely to be contained,” he said.



CfC Stanbic Latest Purchasing Managers' Index (PMI) Report, July

Subdued expansions in output and new orders were partly to blame for the overall slowdown in July. Output growth eased since June, while new business rose at the slowest pace since January. Nonetheless, the respective rates of increase remained robust overall. Commercial initiatives and high customer turnout were reported to have boosted demand, leading to a further rise in activity.

New export work at Kenyan private sector firms also rose more slowly in July, with the latest expansion the weakest recorded so far in 2015. That said, it remained strong in the context of historical data.

Employment continued to increase in July, with the pace of job creation little-changed since June and solid overall. There were reports that new business gains had led companies to hire additional staff in the latest period.

On the price front, total input costs increased at the sharpest rate since March 2014 during July. The overall rise was mainly driven by a marked expansion in purchase prices, while salaries rose only modestly.

According to anecdotal evidence, the strength of the US dollar versus the Kenyan shilling continued to place upward pressure on purchasing costs. Subsequently, companies in Kenya raised their output charges for the fourth straight month in July.