CfC Stanbic global markets economist Jibran Qureishi and Markit Group director Richard Willis (right) during the launch of Kenya Purchasing Manager’s Index survey on June 9, 2015. PHOTO | DIANA NGILA
What you need to know:
Kenyan private sector output in May had a Purchasing Managers Index (PMI) of 55.1 compared to 56.2 in April, which was still the second highest recorded this year.
According to CfC Stanbic, a strong increase in new orders and a rise in payroll numbers helped keep growth going in May, despite of the rise in input and output costs.
Growth in the private sector eased in May compared to April, as businesses faced currency-inspired higher import costs, the Purchasing Managers Index by CfC Stanbic Bank shows.
The Kenyan private sector output in May had a Purchasing Managers Index (PMI) of 55.1 compared to 56.2 in April, which was still the second highest recorded this year. An index lower than 50 indicates a contracting economy.
Manufacturers usually import the larger percentage of their raw materials, especially in the industrial sector, leaving them vulnerable to price shocks once the shilling weakens against the dollar.
CfC Stanbic said the manufacturers’ reported purchase of raw materials and semi-produced goods rose more slowly in May, with the buying activity at an 11-month low.
The PMI is a monthly composite index that takes into account new orders, output, employment, suppliers’ delivery times and stock of items purchased, with the data collected from purchasing executives in approximately 400 private sector companies in Kenya.
“Growth in Kenya’s private sector eased in May although the PMI still indicated a recovery from the slowdown in the first quarter of the year. Notably, cost pressures intensified with both input and output prices rising sharply probably due to the weakness in the shilling which increased the cost of imports for most firms,” said CfC Stanbic economist Jibran Qureishi.
“The cost pressures arising from the weaker currency aren’t likely to be entrenched considering that policymakers are likely to take measures to manage the pace of this depreciation while keeping a close eye on the trade-weighted shilling.”
According to CfC Stanbic, a strong increase in new orders and a rise in payroll numbers helped keep growth going in May, despite of the rise in input and output costs.
This was as a result of expansion by companies, improved marketing strategies and the introduction of new products.
The index survey was done by CfC Stanbic, in partnership with London-based financial company, Markit, to collect monthly economic data on the economy.
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Note: The results are not exact but very close to the actual.
