Kenya PMI October 2019

Kenya

Kenya: PMI dips in October

November 5, 2019

The Purchasing Managers’ Index (PMI)—produced by IHS Markit and Stanbic Bank—fell to 53.2 in October from 54.1 in September, thus moving closer to the critical 50-threshold that separates expansion from contraction and signaling a softer pace of growth in activity.

Both domestic and external demand rose sharply in October, despite output growth slowing down from a month prior. As such, backlogs of work rose for the six consecutive month, prompting firms to raise employment in October. On the price front, input inflation fell to a 40-month low amid falling fuel prices, while output prices decreased for the second time in two years. Firms’ expectations of future activity fell notably, however, posting the weakest optimism in the year so far.

Commenting on the print, Jibran Qureishi, Regional Economist E.A at Stanbic Bank, noted:

"Private sector activity was softer in October as firms again lament what they term as ‘cashflow’ issues. We have in the recent past linked this to the combination of delayed payments of arrears owed to the private sector which was also compounded by the interest rate capping law. The imminent repeal of the interest rate cap is indeed a positive move and will embolden commercial banks to price credit risk again and more importantly for SMEs. That being said, other issues that have restrained aggregate demand continue to persist and ought to be addressed as well in order to bring down banking sector NPL levels and further supplement the improvement of private sector cashflows.”.

FocusEconomics Consensus Forecast panelists expect fixed investment to grow 6.2% in 2020, which is unchanged from last month, and 5.9% in 2021, which is unchanged from last month’s.


Author:, Economist

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Kenya PMI October 2019 0

Note: Purchasing Managers’ Index. Readings above 50 indicate an expansion in business conditions while readings below 50 point to a contraction.
Source: Stanbic Bank Kenya and IHS Markit.


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