Kenya: PMI drops in September but remains above the critical 50-point threshold
October 3, 2018
Kenya’s private sector lost ground in September, as indicated by the Purchasing Managers’ Index (PMI), produced by IHS Markit and Stanbic Bank. The index fell to 52.7 in September from 54.6 in August. The index thus moved closer towards the critical 50-point threshold that separates expansion from contraction in private sector activity, signaling a weaker rate of improvement in business conditions. The print slipped below the historical average, even though it was marginal.
September’s print reflected the weakest pace of expansion in output in 10 months and the slowest upturn in new orders since January. While domestic demand deteriorated, overseas demand strengthened and grew at a swifter rate in September. Nonetheless, as backlogs of work continued to climb with higher output requirements, firms increased their intake of workers. Firms saw a sharp upturn in their cost burdens owing to higher taxes and rising fuel costs, which prompted them to raise their output prices at the fastest rate since February 2014.
Commenting on the outlook for the economy, Jibran Qureishi, Regional Economist E.A. at Stanbic Bank stated:
“[…]cost pressures and enhanced business uncertainty due to new fiscal year tax measures in the third quarter, is likely to moderate the pace of GDP growth.”
Author: Nihad Ahmed, Economist