Kenya: Kenyan private sector returns to growth in May
June 5, 2019
Business conditions in the Kenyan private sector improved modestly in May after deteriorating in April. The Purchasing Managers’ Index (PMI)—produced by IHS Markit and Stanbic Bank—rose to 51.3 from 49.3 in the previous month, moving above the critical 50-point threshold that separates expansion from contraction in activity.
May’s print reflected a solid rise in new orders after they rose at a weaker pace in April. Output increased only marginally, however, as ongoing cash flows problems constrained the pace of expansion. While manufactures increased their payroll numbers at a modest rate, backlogs of work outpaced firms’ ability to reduce the buildup. On the price front, input prices climbed markedly on higher power and transport costs. An import tax on commodities pushed up prices further. Firms responded by raising output prices at the fastest rate this year. Business sentiment strengthened in the month to a nearly five-year high on a brighter outlook on output, with expectations of greater economic stability and reduced cash flow problems.
Looking ahead on prospects for the private sector, Jibran Qureishi, Regional Economist E.A at Stanbic Bank stated:
"…should the government clear arrears owed to the private sector as promised on Madaraka day, private sector activity could benefit from a huge boost."
Author: Nihad Ahmed, Economist