Kenya: PMI increases in November but remains in contractionary territory
December 5, 2017
The composite Purchasing Managers’ Index (PMI), produced by IHS Markit and Stanbic Bank, rose from October’s record low of 34.4 points to 42.8 points in November. Remaining below the critical 50-point threshold, where it has been since May of this year, it signaled another month of contraction in activity, albeit at a weaker pace than the previous month.
Weak demand conditions, stemming from prolonged political uncertainty, led to another sharp decline in output and new orders in November, but at a slower pace compared to October’s survey-record lows. Reduced demand from overseas markets led to a decline in new export orders. A seventh consecutive drop in output, falling new business and insufficient funds prompted firms to shed jobs at the swiftest pace in the history of the survey. Although input prices jumped at the quickest rate since October 2015, reduced staffing costs provided firms with limited scope to reduce average selling prices in a bid to encourage an uptick in demand.
Commenting on the improved result and economic prospects going forward, Jibran Qureishi, Regional Economist for East Africa at Stanbic Bank, stated:
“Business conditions deteriorated at a slower pace, thanks in large part to the conjecture by the private sector that the political impasse is now behind us. However, a sustained recovery is only likely from January onwards as firms once again start to build inventories and thereafter expand production. Indeed, lower political risk could provide the platform for Kenya’s private sector to stage a recovery over the near to medium term, more so as good weather conditions have improved growth prospects for the agriculture sector and reduced inflation expectations.”
Author: Nihad Ahmed, Economist