Kenya: PMI falls to new record low in October, but remains in expansionary territory
November 4, 2015
The composite Purchasing Managers’ Index (PMI), which is produced by Markit and CfC Stanbic Bank, dropped slightly from September’s 51.9 to 51.7 in October, thus hitting the lowest level since the survey began in January 2014. Nevertheless, the index still remained above the 50-threshold, which points to expansion in business activity. The index has been in expansionary territory since the survey was launched.
According to Markit and CfC Stanbic Bank, October’s setback mainly reflects that output and employment grew a very slow pace. On a positive note, growth in new business picked up pace in October. Regarding prices developments, inflationary pressures persisted due to shilling weakness and both input costs and output charges increased.
According to the survey report, “the headline PMI nudged down to a survey-record low of 51.7 in October, as output dropped despite new orders rising which is probably a reflection of firms remaining cautious in their purchasing activities due to higher interest rates. Price pressures eased, while job creation remained sluggish. The directional bias for headline inflation will be to the upside towards the end of the year mostly due to base effects. Indeed, the trend of the PMI over the last two months suggests to us that GDP growth will probably be lower in Q3 and Q4. Sure, public investment in infrastructure will continue to underpin GDP expansion mostly via higher construction output; however it’s imperative to ensure that this doesn’t come at the expense of a stable macroeconomic environment.”