Kenya’s private sector performance hit all-time high in October - Beaking Kenya News

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Thursday, 5 November 2020

Kenya’s private sector performance hit all-time high in October


Kenya’s private sector performance was at a record high in October as business peaked on eased Covid-19 containment measures, the latest Stanbic survey shows.

The bank's monthly Performing Managers Index (PMI) hit 59.1 points; the highest since the survey began in January 2014.

Output rose for the fourth successive month at the start of the final quarter. Moreover, output growth accelerated to the sharpest pace since the survey began in January 2014.

Readings above 50 points signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.

Companies cited greater money circulation and the re-opening of schools and businesses as lockdown restrictions continued to ease.

New business increased during the month under review making it the fourth successive month of expansion.

Thirty five per cent of respondents reported a rise in new work inflows. Anecdotal evidence suggested increased cash flow led to improvements in demand conditions.

Demand pressures remained strong in October.

Sustained output growth and improving demand saw  firms increase their payroll numbers for the first time in eight months.

The pace of job creation was modest, but the strongest since November 2019. Firms linked higher workforce numbers to a rise in workloads and efforts to reduce backlogs.

Purchasing activity across Kenya's private sector rose for the fourth consecutive month, with the rate of growth the sharpest since the survey began in January 2014.

According to respondents, improved demand conditions encouraged firms to engage in input buying.

Average lead times reduced at the start of the fourth quarter. The degree of improvement was sharp and the fastest since July.

According to panelists, availability of materials, efficient transportation methods and strong competitive pressures led to an improvement in vendor performance.

Pre-production inventories held by local firms rose in October, extending the current period of expansion to four consecutive months.

“The rate of increase was substantial and was the fastest since March 2018. Expectations of growing demand and efforts to avoid running out of inventories were the key factors behind the rise in stocks,” the PMI report reads.

Average input prices rose during October, thereby extending the current period of inflation to four consecutive months.

As has been the case since February 2015, purchase costs rose in October. The latest increase was solid overall, and the sharpest since April.

Rises in fuel and raw material costs were reportedly the key drivers of inflation. Almost eight per cent of firms recorded a rise in purchasing costs, with less than one per cent seeing a fall.

A back-to-back monthly increase in staff costs was recorded at the start of the fourth quarter. The pace of increase quickened from that seen in September but was marginal overall.

Firms that noted a rise linked this to efforts to boost morale amid increasing workloads, while those that registered a fall mentioned cost-saving pressures.

With costs rising and demand growing, Kenyan businesses raised their selling prices for the fourth consecutive month during October.

Generally, the business sentiment improved marginally at the start of the fourth quarter after dropping to a series low during September.

Approximately 29 per cent of firms expected output to increase in the year ahead linking this to improved marketing, staff training and the opening of new branches.

Even so, the degree of optimism was weak in the context of the series history attributable to uncertainty surrounding Covid-19.

According to Jibran Qureishi, head of Africa Research at Stanbic.

Bank, business confidence has been on the rise over the last couple of months, courtesy of easing domestic containment measures which has boosted demand, albeit from a low base from April and May

“That being said, with lockdowns being reimposed in some major international trading partners, new orders could ease over the coming months especially if external demand falters,” Qureishi said.

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