Markets & Finance

Private sector growth up for third straight month, survey shows

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Jibran Qureishi, an economist at CfC Stanbic Bank. PHOTO | SALATON NJAU |

rKenya’s economy has registered positive growth for the third month running but the rise was notably at a slower pace than that of a comparable period last year.

According to CfC Stanbic Bank’s Purchasing Managers’ Index (PMI), there was a rise in employment with job creation hitting a three-month high.

The CFC economists attributed increased work backlogs for a seventh straight month to improved job creation.

Skilled labour is also attracting more remuneration as firms compete to attract the best employees which has in turn pushed up costs

“Costs for firms have also been on upward trend over the past couple of months despite the stable exchange rate as attracting labour has become more competitive forcing firms to outbid each other,” Regional Economist for East Africa at CfC Stanbic Jibran Qureishi said.

Mr Qureishi forecasts the situation will improve going forward, saying Central Bank of Kenya’s decision to lower the signalling rate for lending institutions will be instrumental in spurring growth.

Monetary easing

“Conditions within the Kenyan private sector continued to improve, however at a slower pace. Judging by historical standards the PMI has expanded much more softly than previous quarters. The recent easing of the monetary policy stance is thus a good move in order to kick start economic activity,” Mr Qureishi.

READ: Private sector growth rebounds in April

Also read: Firms create new jobs on growing order book

The survey that polls 400 private sector companies also showed that the firms placed new orders in May although the rate of expansion was slower than their respective trends.

Firms also raised their input buying at the quickest rate in three months as they sought to keep pace with private sector expansion.
Growth of total new jobs was mainly supported by exports, which increased for the sixth straight month, notably, with a number of firms in particular making reference to trade with Uganda.

The report indicates that new client contracts and incoming projects had led firms to raise their output. The composite index at the same time indicated an increase in costs to the businesses, both in workers’ pay and in accumulating of new inventories.

“Growth of purchasing activity was sustained at a marked pace similar to that seen in April. New business gains were reportedly behind the rise. As a result, the rate of pre-production inventory building remained strong, with the latest expansion being the quickest since February,” Mr Qureishi said.

Cost pressures increased for the second successive month in May. But the latest rise was weaker than the average over nearly two-and-a-half years of data collection.

Higher purchase prices were behind the overall rise, with firms commenting on greater raw material and transportation costs. Charges also rose more quickly, climbing to a five-month high.

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