Kenya: PMI rises to three-month high in January
February 3, 2021
The Purchasing Managers’ Index (PMI)—produced by IHS Markit and Stanbic Kenya Bank—rose to 53.2 in January, up from December’s 51.4 and marking a three-month high. As such, the index moved further above the 50-thresholhd, reflecting that operating conditions in the Kenyan private sector improved quite notably in January.
January’s improvement came on both output and new orders growing at the strongest pace since October, while exports also increased, although the growth rate slowed down to a seven-month low. Firms noted that the easing of restrictions led to higher consumer spending in the month. Moreover, the sharp increase in new orders translated into an improvement in employment levels, which rose at the strongest rate in over a year.
On the price front, input costs increased notably, largely due to the hike in late December of the VAT to 16% from the previous 14%, prompting suppliers to increase prices. However, shortages of raw materials and growing demand for inputs also contributed to the price increase. As such, output prices grew at the strongest rate in 18 months in January, after decreasing for two consecutive months, as most firms passed on the price hike to clients. Lastly, firms’ expectations for the next 12 months improved sharply in January, reaching a seven-month high, following December’s record low.
Author: Marta Casanovas , Junior Economist