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Economic recovery points to more jobs

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Production Workers at a Nairobi-based food processing factory. FILE PHOTO | NMG

The private sector reported expanded economic activity in December, the first time the indicator showed positive growth since April, signalling hopes of more job prospects and improved tax collection after a bruising election year.

The Stanbic Bank Kenya Purchasing Managers Index (PMI) for December rose to 53 from 42.8 in November, crossing the 50 mark that separates expansion from contraction.

A print above 50 denotes growth in overall business activity compared to the previous month, while a reading below that mark points to a contraction in activity undertaken by firms.

Companies surveyed reported growth in production, new orders, stocks of purchases and employment, reversing a generally downward trend since May.

The firms, however, said they continued to experience inflationary pressures which they passed onto consumers by raising selling prices on average.

“The Stanbic PMI rose above the 50.0 level mark for the first time since April as the private sector began to benefit from political stability,” Stanbic Bank economist for East Africa Jibran Qureishi said in a statement Thursday.

“Looking ahead, we remain optimistic that growth will recover over the coming year supported by the agriculture and tourism sector, while a resumption in public spending will also add some much needed stimulus.”

Goods and services cost more in December than November as companies passed onto consumers the burden of higher input costs, which they reported rose by the sharpest margin in 26 months.

There was a general rise in prices of raw materials, Stanbic and IHS Markit said, citing anecdotal evidence.

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KRA relief

The rebound in private sector activity will give some relief to the Kenya Revenue Authority (KRA) which has struggled to meet revenue targets due to a softer economy, believed to have expanded at slowest pace in five years in 2017.

Total tax collection in July to November rose by 7.36 per cent to Sh508.70 billion, but fell short of expectations given a revised target of Sh1.44 trillion for the year to June 2018.

“It’s been a tough year for business, it’s also been a tough year when it comes to revenue collection. Our five-year average growth in revenue has been 14.05 per cent.

So we are lagging behind to that extent,” KRA commissioner-general John Njiraini said on December 15.

“With election issues behind us, we expect business to pick up (from January) and stabilise and Kenyans to go back to work. The government’s fiscal plan is also coming back on track in terms of release of funds for development purposes to the counties and national government programmes, which in itself, has (growth) impact on tax collection.”

Jumpstart economy

President Uhuru Kenyatta’s re-election in the October 26 repeat poll, boycotted by the main opposition coalition Nasa, was upheld by the Supreme Court on November 20.

Mr Kenyatta has since pledged to focus state resources on what he calls the “Big Four Agenda” – manufacturing, food security, affordable housing and healthcare – in to jumpstart the economy.

Latest official data shows economic growth dropped to a five-year low in the third quarter of 2017 due to the effects of a prolonged electioneering period, a slowdown in credit to the private sector and a biting drought earlier in the year.

READ: Poll jitters cut business output to four-year low