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Kenya PMI February 2018

Kenya: PMI shoots up to the highest print in nearly two years in February

The composite Purchasing Managers’ Index (PMI), produced by IHS Markit and Stanbic Bank, jumped to 54.7 in February from 52.9 in January, indicating a marked improvement in business conditions. The index moved further up from the critical 50-point threshold that separates expansion from contraction in private sector activity, signaling a faster pace of expansion. The private sector expanded for the third month running following seven consecutive months of contraction. February’s PMI was the highest print since April 2016.

Stronger demand from domestic and foreign markets, along with higher inflows of new business, spurred a survey-record acceleration in output and the sharpest rise in new orders since January 2017. Greater demand overseas led to the fastest increase in new export orders since November 2016. Inventories held by firms were reported to have increased in tandem with expansion in new orders. Despite rising new business, backlogs of work declined for the first time in three months. Sufficiency of resources enabled timely completion of new work. Firms hired more workers to meet the higher output requirements, with the rate of job creation climbing to a nine-month high. That said, it remained marginal overall. Input prices soared, rising at the quickest pace since March 2014, amid an upturn in transportation costs, greater volatility in the shilling, and persistent raw materials shortages. This prompted firms to raise their output prices to transfer the burden of cost-adjustment onto customers.

Jibran Qureishi, Regional Economist for East Africa at Stanbic Bank, offered an outlook on the economy in the coming year:

“The Stanbic Bank PMI rose to its highest level in nearly two years. We still expect strong performances mainly from the services and agriculture sectors to support GDP growth this year, in addition to the ongoing public investment in infrastructure. Of course, a key boost to the economy could also transpire in the event that there is a revision to the interest rate capping law over the course of the year which will subsequently begin to improve the flow of credit to the private sector and assist in boosting productive capacity.”

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