Kenya’s private sector sees fifth consecutive month of growth but outlook dims
The Stanbic Bank Kenya Purchasing Managers' Index (PMI), which gauges the level of private sector activities, rose to 50.6 in February, up from 50.5 in January.
Kenya's private sector activity picked up marginally in February on the back of greater stabilisation of the wider economy and lower inflationary pressure, a survey has shown.
The Stanbic Bank Kenya Purchasing Managers' Index (PMI), which gauges the level of private sector activities, rose to 50.6 in February, up from 50.5 in January.
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Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
Notably, the headline PMI was consistent with a strengthening of business conditions for the fifth month running, with the headline figure staying above 50.0 since October last year.
However, the reading was below its long-run average of 51.2, and signalled only a marginal overall improvement.
The survey report indicates that the greater stabilisation of the wider economy drove higher demand and output during the month under review.
"Lower inflationary pressures also supported the upturn, as both input and output prices rose at the slowest rates for four months," the PMI report reads.
Nevertheless, the growth signal derived from the survey was relatively mild in February, particularly as several businesses continued to report challenges boosting sales.
Employment and inventories also rose only slightly, in line with a subdued outlook for year-ahead activity.
Several firms from the survey reported expanding their product offerings and investing more in marketing.
The volume of new orders also rose for the fifth month in succession, with improving cash flow, softer price pressures and new products and services encouraging an increase in demand.
However, many firms reported challenges in boosting sales, resulting in an overall rate of new business growth that was only slight.
Sector divergences were apparent in February, with output and new business growth driven by agriculture, manufacturing and construction.
Meanwhile, wholesale and retail and services firms recorded declines in activity, new work and purchases of inputs.
Business sentiment for the coming year dropped to one of its lowest points on record in the month under review.
Notably, only five percent of surveyed firms anticipated an upturn amid ongoing concerns about the wider economy and high competition.
"We reiterate that businesses remain doubtful about future output expectations. Still, lower interest rates may well resuscitate lending among firms and thereby drive economic activity," said Christopher Legilisho, an economist at Standard Bank.
Subsequently, firms made only limited improvements to staffing and inventories.
Although employment growth recovered to a four-month high, it was weaker than its long-run trend.
Similarly, the uplift in stocks was below-average, as purchasing activity fell for the first time since July 2024.
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