Kenya: PMI dips slightly in August, but remains in expansionary territory
September 3, 2020
The Purchasing Managers’ Index (PMI)—produced by IHS Markit and Stanbic Bank Kenya—decreased slightly to 53.0 in August, down from July’s 54.2. Although the index dipped, it remained above the 50-threshold, signaling the second consecutive month of improved business conditions.
Despite August’s slight drop, new orders jumped—albeit at a slower pace than in July—thanks to a boost in demand amid a further easing of Covid-19 restrictions. Similarly, output grew for the second consecutive month in August, although at a softer pace than in July. Moreover, export sales grew notably, thanks to the reopening of international borders, also boding well for the tourism sector. Likewise, external demand showed signs of improvement, with new orders from Europe particularly strong. All said, however, unemployment continued to rise as companies struggled to reduce still too-high production costs. Looking ahead, business expectations improved in August for the first time in six months.
Commenting on the reading, Jibran Qureishi, regional economist at Stanbic Bank, said:
"A second consecutive month of growth continues to indicate that the private sector is moderately emerging from the trough in April. Easier curfew restrictions and ameliorating external demand continue to support purchasing activity. That said, the employment subcomponent index still remains below the 50 level, largely reflecting firms scaling back on wage costs.”
Author: Marta Casanovas , Junior Economist