Private sector shows signs of recovery, boosted by gains in retail and manufacturing
Looking ahead, businesses showed a greater level of optimism towards future output for the third consecutive month in August, which took overall sentiment to its highest since February 2023.
Output expansion in manufacturing and wholesale, and retail helped soften the downturn in Kenya’s private business activities in August, as the sector recorded a contraction for the fourth consecutive month.
The latest Stanbic Bank's Purchasing Managers’ Index (PMI) shows improvement in the aforementioned sectors was subdued by declines in the agriculture, construction, and services sectors.
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Consequently, the headline index stood at 49.4 during the month, below the 50.0 no-change mark.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
However, the record is a jump from the previous month when the index stood at 46.8, indicating a milder contraction.
Notably, the past three months recorded contractions, with July marking the steepest decline in private business activities in over a year.
The month’s PMI declined to 46.8 from 48.6 in June, signalling a solid downturn in the health of the private sector. The figure headlined 49.6 in May.
In the month under review, new orders received by Kenyan businesses fell for the fourth month running.
However, the rate of decline softened markedly and was the slowest recorded in this period.
While some firms continued to highlight weak purchasing power at clients, others saw a pick-up in new business and a general recovery in economic conditions from the last few months of protest-related disruption.
The period also saw a softer reduction in the purchasing of inputs, as some companies were encouraged by the improving demand outlook to restart procurement activity.
“This allowed inventories to rise slightly after a drop in July,” the report reads.
Employment levels also increased.
Although job creation remained mild, the uplift was the fastest seen in 15 months. Vendor performance also improved notably during the month.
Nevertheless, the Kenyan companies also reported a solid increase in input costs in August, although the pace of inflation slowed down for the first time in five months.
While wage pressures intensified, the increase in purchase prices was less marked than in July. Several firms commented on higher costs linked to taxes on items such as fuel.
As part of efforts to stimulate a recovery in demand, output charges rose only marginally and to the least extent in 12 months.
Looking ahead, businesses showed a greater level of optimism towards future output for the third consecutive month in August, which took overall sentiment to its highest since February 2023.
“With demand stabilising, companies reportedly placed greater confidence in their ability to secure higher sales through increased marketing and diversification efforts.”
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