Stanbic Bank has released its latest Purchasing Managers’ Index™ (PMI) survey which indicates that Business activity in the Kenyan private sector expanded markedly in October.
During the period, companies highlighted a further improvement in sales intakes amid broader economic strengthening. The rising demand encouraged firms to increase their purchasing activity for the first time since April. The improved economic environment was also supported by a milder increase in business expenses, with input costs rising at the slowest pace in just over a year.
The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI®). Readings above 50.0
signal an improvement in business conditions on the previous month, while readings below 50.0 show a
deterioration.
The PMI registered in expansion territory for the second month running in October. At 52.5, up from 51.9 in September, the index signalled a solid improvement in overall operating conditions. Notably, this was highest that the index has been since February 2022.
The PMI survey indicated a further rebound in the Kenyan private sector following the disruptions caused by
protests in the second quarter of the year. Output and new business intakes increased for the second consecutive month, with both growth rates accelerating. In terms of output, the latest expansion was the strongest since December 2021.
Firms frequently cited robust demand conditions amid improving economic prospects, along with the impact of new product launches and promotional pricing strategies.
Notably, all of the main sectors monitored by the survey experienced an upturn in activity in October. This
contributed to a broad-based increase in input procurement, with total purchasing activity rising for the first time since April. There were also some initiatives to enhance workforce capacity, although the pace of job creation was only marginal.
Kenyan businesses reported relatively stable conditions regarding supply chains and price pressures at the start of the fourth quarter. Lead times shortened for the ninth consecutive month, with panellists often attributing efficiency gains to subdued input demand in recent months and increased vendor competition. However, the pace of improvement eased from September’s four-year high.
With purchases increasing and delivery times improving, Kenyan firms were able to expand their input inventories during October.
Regarding prices, firms indicated that input costs rose in October, but only marginally. In fact, the overall rate of
inflation was the slowest in 13 months, with both purchase prices and overall wage costs increasing at a slower pace
than in September. When cost increases were reported, businesses mainly cited a combination of rising import prices and higher taxes, including increases in VAT and fuel duties.
Output prices also increased, but the rate of growth was similarly modest. Notably, the wholesale & retail sector
was the only one to see a noticeable uptick. Several firms mentioned offering discounts to attract sales as economic
activity improved.
Finally, output expectations dipped to a four-month low in October, yet they remained among the strongest since
early 2023. Exactly 20% of survey respondents forecasted an increase in activity by October next year, while the
rest maintained a neutral outlook for the private sector.