Kenya: Business conditions improve in February
The IHS Markit Purchasing Managers’ Index (PMI) rose to 52.9 in February from 47.6 in January. As such, the index moved above the 50-threshold, signaling an overall improvement in business conditions from the previous month.
The improvement was driven by output and new orders returning to growth, as a drop in Covid-19 cases prompted a rebound in customer demand, while increased marketing efforts also contributed to the improvement. However, backlogs of work rose in the month as job numbers dipped amid cash flow issues, which were the result of a greater tax burden and rising commodity prices. As such, input price inflation rose at the steepest rate since September 2018, and output prices were raised at a strong pace as a result. Despite greater cost burdens, purchasing activity increased at the strongest pace in 16 months on the back of expectations that sales would continue to grow going forward. Lastly, business sentiment improved.
Analysts at the EIU expect challenges to remain ahead:
“As the strong rebound in 2021 is due partly to a recession-hit baseline, we expect growth to retreat to 4.5% in 2022. The forecast reflects a wider global slowdown alongside heightened uncertainty linked to the election in August (which could dent confidence). Other constraining factors in 2022 will be tighter fiscal policy (including likely tax increases), a rise in domestic interest rates in response to global trends and inflationary pressures, and still-fragile tourism. Inadequate rains in the main March–May wet season would add to the strains, although favourable weather would support a rebound in agriculture. Household spending will potentially face headwinds in 2022, amplified by flat or negative real wage growth.”