Firms create new jobs on the back of growing order book
CfC Stanbic Bank economist Jibran Qureishi. PHOTO | ROBERT NGUGI
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Surveys report optimism rebound in business community as salary growth picks up to two-year high.
The private sector created new jobs as production expanded on the back of new orders triggering quarter one growth, according to two supplies indices.
The Purchasing Managers’ Index™ (PMI™) data by CfC Stanbic Bank which assesses business indicators showed companies had hired more hands to help them deliver on backlogs.
Standard Chartered’s (StanChart) Business Sentiment Indicator also found there was increased job creation driven by higher local demand attributed to Easter holidays.
The two surveys concluded the Kenya economy was on the up driven by new orders, backlogs and exports.
“A faster expansion in new export orders contributed to growth of total new business. The latest increase was the steepest in 10 months, with firms noting high demand from neighbouring economies including Uganda,” said regional economist at CfC Stanbic Bank Jibran Qureishi.
Mr Qureishi said salary growth had picked up to a two-year high. Employment creation has become a key concern in the country following disclosure that more than 500,000 graduates were joining the job market each year.
StanChart reported optimism rebound in the business community in April to a scale of 63.9 up from 58.1 of March, as measured by the bank’s Business Sentiment Indicator.
“Sentiment was driven by a pick-up in domestic demand and a related uptick in production. Firms also reported that stronger financial positions were supported by greater credit availability, lower interest rates and a less negative exchange rate,” said StanChart’s chief economist for Africa, Razia Khan.
The economists however noted that the growth this year is lower compared to the same period last year.
“While the reading was positive, the indicator remained below its level a year ago, suggesting that activity may not be as robust as during the same period in 2015,” said Ms Khan.
Kenya hopes to grow its economy by seven per cent this year compared to last year’s 5.6 per cent. The Jubilee government is banking on the recovery of the tourism sector following the lifting of travel warnings and continued infrastructure spending to spur the economy.
It is expected to speed up the conclusion of ongoing infrastructure projects to boost its re-election bid next year.
The Treasury has ordered ministries to concentrate on ongoing projects indicating it will not be setting aside cash for new development.
Mr Qureishi noted the recent stability in the exchange rate would ensure input and output costs remain well contained for firms which will help to bolster production.
Easing of lending rates which had peaked at record highs at the end of last year is expected to also ease funding of expansion plans. Spike in the cost of funds had forced some investors to shelve expansion plans.
Prices had also been pushed up as producers sought to pass on the higher financing costs to consumers resulting in a slowdown in demand.
