Kenya: PMI climbs to 27-month high in April
May 4, 2018
The composite Purchasing Managers’ Index (PMI), produced by IHS Markit and Stanbic Bank, climbed to a 27-month high of 56.4 in April, up from 55.7 in March and above the historical average of 52.8. The index moved further up from the 50-point threshold that separates expansion from contraction in private sector activity and indicates an ongoing improvement in business conditions. April’s print marked the fifth consecutive month of expansion since the index sank below the critical mark during the drawn-out election cycle in 2017.
Favorable demand from both domestic and external markets drove output to grow at the highest rate in the survey’s history, thanks to brightening economic conditions and greater inflows of new business. New orders climbed for the fifth month running in April, with the rate of expansion quickening to a 17-month high. Export orders from overseas markets also increased at a sharp pace, albeit moderating from March’s survey-record high. Operating conditions across Kenya’s private sector improved in April to the greatest extent since January 2016. Firms raised their staff intake at the swiftest pace since December 2016 in response to the sustained output growth. A stronger U.S. dollar led to higher imported costs for raw materials and raised input costs faced by private sector firms in April.
Commenting on April’s survey findings, Jibran Qureishi, Regional Economist E.A. at Stanbic Bank commented:
“The strength of the recovery in private sector activity continued last month. This shows that the underlying demand conditions in the economy are consistent with a solid recovery in economic activity. Thus far, this strength in activity has not been associated with any noticeable inflation pressures. But there are reasons for some caution. The combination of rising demand, both domestic and external, with rising input costs and rising employment have the potential to exert meaningful and durable upward pressures on inflation. Nonetheless, the rate of input cost inflation eased further from February’s recent high.”
Author: Nihad Ahmed, Economist