Kenya: PMI stable in November
December 4, 2019
The Purchasing Managers’ Index (PMI)—produced by IHS Markit and Stanbic Bank—came in at 53.2 in November, matching October’s reading, thus staying above the critical 50-threshold that separates expansion from contraction and signaling a healthy rate of growth in activity.
Production among Kenyan firms rose at the fastest rate in four months amid good weather conditions and increasing sales. Meanwhile, new orders increased at the slowest pace since May, although the rise was still solid. Due to the increase in output requirements, firms raised employment levels for the seventh month straight. On the price front, output prices fell at a marginal rate despite higher demand, while input cost inflation was the lowest in over two years. Lastly, sentiment among manufacturers dropped notably in November, sinking to a 33-month low, as expectations of activity in the coming year weakened.
Commenting on the print, Jibran Qureishi, regional economist for East Africa at Stanbic Bank, noted:
"The future output sub-index still indicates that firms are cautious on activity over the coming year. However, in comparison to most surveys since the beginning of this year, less panelists complained about cashflow issues this month. Of course, needless to say, the government should continue to clear pending arrears owed to the private sector in order to alleviate these cashflow constraints. Furthermore, as commercial banks begin to extend credit following the repeal of the interest rate capping law, the private sector will indeed be in a much better position than it currently is or has been for the past 2 and a half years. To recall, one also must acknowledge that the rise in arrears owed to the private sector has somewhat also contributed to sticky NPLs in the banking sector."
Author: Hanna Andersson, Economist