Private Sector Activity Grows Amid Political Stability

Business activities in Kenya improved for the first time in 7 months backed by political stability in the country, a new report has revealed.

The August Stanbic Bank Kenya Purchasing Managers’ Index (PMI) survey has indicated a slight boost in the health of the private sector as output and new orders returned to expansion territory.

 This is after the opposition called off its demonstrations and opted for a bi-partisan talk with the Kenya Kwanza team as the demos by the former forced businesses to close in the affected areas during the days the demonstrations were held.

August’s reading stood at 50.6 up from 45.5 in July signaling an expansion in business conditions since the beginning of the year.

Readings below 50.0 show a deterioration in the business environment while those above 50.0 signal an improvement in business conditions.

“The August Purchasing Managers Index (PMI) implies economic growth recovering compared to July, as well as a likely positive economic performance in Q3:2023,” said Christopher Legilisho, an Economist at Standard Bank.

“There was a notable expansion of output in August, specifically in services and manufacturing. New orders too ticked in August, with export orders received by firms rising for a sixth straight month Firms noted that improved food supply, increased marketing of products and a calm political environment supported new orders growth,” added Legilisho.

Read: Kenya’s Inflation Eases To 6.7pc In August

On the flip side, the improvement in business conditions was mild as they were weighed down by inflationary pressures and a surge in prices of commodities as input prices continued to rise at a historically strong pace.

“However, tough business conditions and inflation pressures remain a pressing concern for Kenyan businesses, as input prices and staffing costs were seen rising due to a weaker exchange rate as well as higher taxes related to the recently enacted tax measures in the Finance Act,” noted Legilisho.

Input prices continued to rise at an elevated pace in August due to a further rise in purchase prices in sectors such as construction, wholesale and retail as they cited the weakening of the shilling against the dollar and higher fuel prices.