Firms resume hiring as business conditions improve

Private sector firms resumed hiring in May after cutting jibs in April as business conditions marked a significant improvement following ease to restrictions at the start of the month.

According to data from Stanbic Bank Kenya Purchasing Managers Index (PMI), both employment and output rose by the highest rate since January this year, a month that marked another loosening of containment measures.

The headline PMI reading subsequently rose above the neutral 50 points mark to 52.5 points from 41.5 points in April.

Nevertheless, the expansion in May remained below the rate of contraction in April implying the performance of the economy remains below the level seen before restrictions were reimposed. Job creation during the month was anchored on a strong rebound in workloads.

“As expected, the lifting of public health restrictions at the beginning of May resulted in a significant improvement in business activity in May. Fewer restrictions resulted in higher demand as indicated by the rise in new orders,” noted Stanbic Bank Fixed Income and Currency Strategist Kuria Kamau.

“Firms appear to be increasingly optimistic about the next 12 months as new COVID-19 case numbers continue to fall and vaccinations continue to rise.”

At the same time, businesses increased input purchases in readiness to meet increased demand for orders.

Nevertheless, greater orders for the private sector firms did not result in expanded profit margins as input costs rose from inflation, attributed to greater transport and fuel costs in the period.

Similarly, staff expenses edged upwards for the first time since October 2020.

Confidence in future growth was however greater and at a three-month high with an average 27 per cent of surveyed companies expecting an overall upturn in business conditions.