Private sector gains stretch on economic turnaround

Private sector activity measured by the Stanbic Bank Kenya Purchasing Managers Index (PMI) strengthened for the first time in five months in October.

The headline PMI improved to 51.4 points from 50.4 points in September as new business volumes continued to rise extending the growth curve that first begun in May this year.

The increase in output has been driven largely by the normalization of spending following COVID-19 related disruptions.

New orders received by Kenyan firms rose for a sixth straight month with the highest rate of expansion seen in services providers such as wholesale and retail traders.

“In October, business activity expanded at the fastest pace in the past five months driven by higher demand and output. The improvement in domestic demand was driven by increased client spending primarily in wholesale and retail trade,” noted Stanbic Bank Fixed Income and Currency Strategist Kuria Kamau.

Subsequent to consistent growth in output, private sector entities have raised their level of staff for the sixth consecutive month as firms look to boost their overall capacity.

Firms have also raised their purchasing activity to grow their stock levels in anticipation of increased demand in the short run.

Even so, local firms have seen input costs rise over the last month forcing many to pass-on the higher costs to consumers in an effort to preserve profit margins.

In spite of the turnaround, the future output index which weighs growth prospects over the next 12 months has remained at a record low owing to continued COVID-19 uncertainities.