Market News

Private sector growth hits highest point in 22 months

Ongoing heavy investment in infrastructure is expected to  further boost business environment in Kenya. PHOTO | FILE
Ongoing heavy investment in infrastructure is expected to further boost business environment in Kenya. PHOTO | FILE  

The private sector reported improved operating conditions in February hitting a 22-month high, an indication of more jobs prospects and economic activity.

The Stanbic Bank Kenya #ticker:CFC Purchasing Managers’ Index (PMI) for February rose to 54.7 in February from 52.9 in January, marking the highest level since April 2016.

The PMI has now recorded above the neutral 50-mark threshold for three consecutive months, and the February’s reading was stronger than the series average of 52.6.

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

“The Stanbic Bank PMI rose to its highest level in nearly two years. We still expect strong performances mainly from the services and agriculture sectors to support GDP growth this year, in addition to the ongoing public investment in infrastructure,” said Stanbic Bank regional economist for East Africa Jibran Qureishi.

“Of course, a key boost to the economy could also transpire in the event there is a revision to the interest rate capping law over the course of the year which will subsequently begin to improve the flow of credit to the private sector and assist in boosting productive capacity,” he said.

The PMI survey findings showed that increase in business activity was linked to stronger underlying demand conditions and greater inflows of new work.

New business placed at the private sector firms increased for the third consecutive month during February, and the pace of growth accelerated the fastest since January 2017.

New work increased in tandem with a high customer turnout and strong demand from both domestic and external sources, as new export orders increased at the fastest pace since November 2016.

In response to greater output requirements, the firms increased their staffing levels in February.

Although the pace of job creation was the fastest in nine months, it remained marginal overall. Robust demand conditions prompted firms to raise purchasing activity during the month.

In line with the trend for purchasing activity, pre-production inventories held by the firms increased for the third consecutive month.

However, the firms passed onto consumers the burden of higher input costs due to higher transportation costs, currency volatility, raw material shortages and inflation.