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Kenya PMI March 2018

Kenya: PMI soars to 26-month high in March

The composite Purchasing Managers’ Index (PMI), produced by IHS Markit and Stanbic Bank, climbed up to a 26-month high of 55.7 in March from 54.7 in February. The movement of the index further up from the 50-point threshold, which separates expansion from contraction in private sector activity, signaled a continued improvement in business conditions. This marked the fourth consecutive month of expansion since the index plunged below the critical threshold during the prolonged election cycle.

March’s PMI reading was underpinned by a speedy acceleration in output and new orders thanks to buoyant demand in both the domestic and international markets, along with higher inflows of new business. Output grew at the quickest stride in the history of the survey, which began in January 2014, and new orders rose at the fastest rate in 15 months. New export orders also expanded at a survey-record high pace. Firms increased their staff in-take to meet the higher output requirements; the rate of job creation rose to the fastest in 10 months. Input prices continued on an upward trend owing to a combination of higher costs for raw materials and transportation. Firms responded by raising their output prices to transfer the burden of cost-adjustment onto consumers.

Jibran Qureishi, Regional Economist for East Africa at Stanbic Bank, highlighted two additional factors conducive to an improved performance by the Kenyan economy going forward:

“[…] recovering economic growth in key trading partners such as Uganda as well as the growing consensus that the interest rate capping law will either be significantly modified or abolished, should bode well for Kenya’s private sector over the better part of this year.”

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