Kenya: PMI regains lost ground in October
November 5, 2018
In October, activity picked up in Kenya’s private sector following a deterioration in the previous month, as reflected by a rise in the Purchasing Managers’ Index (PMI), produced by IHS Markit and Stanbic Bank. The index climbed to 54.0 in October, from September’s 10-month low of 52.7, moving further above the critical 50-point threshold that separates expansion from contraction, signaling an improvement in business conditions.
New orders grew at a solid rate, thanks to robust demand from both domestic and overseas markets. Exports demand was especially strong this month, growing at the second-fastest pace in survey history. This, along with favorable weather conditions, drove overall output higher. Output grew more rapidly in October compared to last month. Firms hired more workers to deal with increasing backlogs of work, with the rate of employment rising to the strongest in six months. Anecdotal evidence suggests that the additional staff hired were done so on a temporary basis to meet current demand. On the price front, higher fuel and food costs, along with workers’ wages and other raw materials, caused a rise in overall input costs. Firms raised their output prices in response, to pass the burden of cost-adjustment onto consumers.
Commenting on the outlook for the economy, Jibran Qureishi, Regional Economist E.A. at Stanbic Bank stated:
“The onset of the short rain season which so far seems quite positive for the agrarian sector, could help GDP growth recover in the fourth quarter of 2018.”
Kenya Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists expect fixed investment to expand 6.2% in 2019, which is unchanged from last month, and also forecasts an expansion of 6.2% in 2020.
Author: Nihad Ahmed, Economist