Kenya: PMI recovers in August
September 3, 2015
The composite Purchasing Managers’ Index (PMI), which is produced by Markit and CfC Stanbik Bank, rose from July’s four-month low of 54.1 to 55.0 in August. As a result, the index rose farther above the 50-threshold, which points to expansion in business activity. The index has been resting in expansionary territory since the survey’s beginning in January 2014.
According to Markit and CfC Stanbik Bank, August’s improvement mainly reflects that output and new orders recorded larger expansions. Conversely, new export orders dropped and the rate of job creation grew at a slower rate compared to the previous month. Regarding price developments, input prices tallied another notable rise, largely reflecting the pass-through effect of the depreciated Kenyan shilling. Output charges also increased, driven by rising demand and input costs.
According to the survey report, August’s result is, “consistent with a robust improvement in business conditions midway through Q3.” Jibran Qureishi, Economist at CfC Stanbic Bank, added that, “business conditions improved in August, underpinned by strong expansions in output and new orders. Cost pressures remained elevated […]. We still think there is a bias for the MPC to tightening its policy stance further in order to curb inflationary expectations from rising while also ensuring that the currency pressures subside. Given the current risk averse philosophy that foreigners have adopted towards Africa, a tighter monetary policy stance will have to be supplemented with higher real yields in the money market to stabilize the currency. […] it’s encouraging to note that domestic demand was probably the main driver of the expansion in growth in August, which underlines the resilient and diversified nature of the Kenyan economy.”