Job openings raise hope of economic rebound in 2021

Job openings in the private sector in January rose at the second fastest pace over the past year, signalling a gradual economic rebound as more businesses and learning institutions increased spending.

The Markit Stanbic Bank Kenya’s Purchasing Managers' Index (PMI) — a monthly measure of private sector activity — shows that the rate of new hires was the fastest since October before authorities tightened some of the pandemic’s containment measures, which had been eased, to stem a second-wave of coronavirus infections.

Business managers polled in the closely watched monthly survey between January 12-27 said they added workers as a result of rising demand for goods and services.

“Output and new orders both rose sharply in the new year, with growth of each quickening to the fastest since last October,” analysts at Stanbic Bank and UK’s IHS Markit wrote in the PMI report for January.

“Firms highlighted that the reopening of businesses and improved cash flow in the economy helped to generate higher customer spending.”

The overall headline PMI reading— a month-on-month gauge of private sector activity such as output, new orders, employment and backlogs — came in at 53.2 in January from 51.4 in December, 51.3 in November but lower than 59.1 in October.

Readings above 50 denote growth while those below point to contraction in economic conditions for the private firms in key sectors such as manufacturing, services and agriculture.

Customer spending went up despite the cost of goods and services rising to a one-and-a-half-year high after value added tax (VAT) reverted to pre-Covid 16 percent from 14 percent, which was in place between April and December 2020.

“Economic activity picked up in January on account of an improvement in customer spending due to improving cash flows in the economy and the re-opening of schools,” Kuria Kamau, a fixed income and currency strategist at Stanbic Bank, wrote in the PMI report, explaining the rise in output and new orders.

“While inflationary pressures from the higher VAT and raw material shortages led to a steep rise in output prices, firms are now more positive about an improvement in business conditions over the next 12 months than they were last month.”

The Ministry of Health has said the first batch of 24 million Covid-19 vaccine doses will arrive mid-February, raising protection levels for workers in essential sectors such as health, security and education.

The uptick in economic activity came in the month President Uhuru Kenyatta extended the night curfew between 10 p.m. and 4 a.m. to March 12. Tighter lockdowns in Europe — a key buyer of Kenya’s fresh produce — to contain the second wave of infections condemned export orders to the most sluggish growth since July.

The PMI data corroborates a recent poll by Barcelona-based FocusEconomics between January 19 and 24 on panelists from 15 global banks, consultancies and think-tanks, whose findings projected Kenya’s economy was likely to expand 5.0 percent this year.

The consensus forecast, an upgrade from 4.9 percent a month earlier, signals a recovery from an estimated growth of 0.6 percent in 2020 — the slowest expansion in about two decades.

“GDP is set to grow notably this year on strong private and capital spending,” analysts at FocusEconomics wrote in the outlook report on Kenya.

“Moreover, the vaccine rollout should start in February when the first doses arrive in the country, boding well for activity ahead, while debt relief should aid public finances and bolster stimulus to support the economy further.”

Central Bank of Kenya governor Patrick Njoroge on January 28 forecast “a strong recovery” in economic activity in 2021, largely driven by agriculture, construction and manufacturing.

“In essence, (we are past) the dark days of 2020 with the re-opening of the economy and with dynamism and momentum that is being gained in these dynamic sectors, we expect that this will push us strongly into 2021,” Dr Njoroge said.

PMI data, however, showed payroll costs for most firms remained unchanged, while a few reported a marginal fall for the eighth time in 10 months, signalling new recruits came in on a lower salary as companies struggle to take production back to pre-Covid levels.