Kenya: PMI continues to fall but remains solid in August
September 4, 2019
Business conditions in the Kenyan private sector improved again in August, although more weakly than the previous month. The Purchasing Managers’ Index (PMI)—produced by IHS Markit and Stanbic Bank—fell to 52.9 from 54.1 in July, thus remaining above the critical 50-point threshold that separates expansion from contraction and signaling a softer pace of growth in activity.
On the one hand, output growth slowed sharply, with firms citing cash flows problems. On the other hand, new orders climbed markedly over the month, lifting backlogs of work in turn. Firms continued to hire more workers, although at a modest rate overall. On the price front, input costs rose on higher taxes on some commodities and a stronger US dollar. Firms raised output prices in response, although at a softer pace due to a slight weakening in new order growth.
Commenting on the print, Jibran Qureishi, Regional Economist E.A at Stanbic Bank, noted:
"For the first time since May, firms have once again voiced concerns around cash flow issues. To ensure inclusivity in economic growth, urgent reforms ought to be conducted on improving accessibility to credit for companies, in addition to a consistent plan by the government to clear arrears owed to the private sector. Both these factors have restrained private sector activity. In fact, the interest rate capping law continues to strangle the private sector and if the law remains in place in its current form, it will only add to the plight of the private sector."
Author: Nihad Ahmed, Economist