Business / Economy
Tuesday, 07 Jun 2016 08:55 EATnewsdesk@kenyafreepress.com
Kenya’s private sector remained in good health during May, as business conditions improved solidly as both output and new orders increased, according to the latest Purchasing Managers’ Index (PMI) data released by CfC Stanbic Bank.
The underlying strength of the economy was nevertheless highlighted by a faster rise in employment, with job creation being at a three-month high. Firms also raised their input buying at the quickest rate in three months as they sought to keep pace with private sector expansion.
Commenting on May’s survey findings, Jibran Qureishi, Regional Economist EA at CfC Stanbic Bank said: “Conditions within the Kenyan private sector continued to improve, however at a slower pace. Judging by historical standards the PMI has expanded less than previous quarters. The recent easing of the monetary policy stance is thus a good move in order to kick start economic activity.”
“On a positive front, job creation looks set to improve for a seventh straight month. 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,” he explained.
Higher output and new orders continued to bolster Kenya’s private sector in May. Both rose steadily, though the rates of expansion were slower than expected. The report indicates that new client and incoming projects had led firms to raise their output. Moreover, growth of total new work was supported by exports, which increased for the sixth straight month. Notably, some firms made particular reference to trade with Uganda.
In line with ongoing improvements in demand, employment rose again in May. Furthermore, the rate of hiring quickened since April to a three-month high. The pick-up in job creation failed to alleviate pressure on operating capacity, however, as continued new order growth meant that backlogs increased for the seventh month running.
“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 the quickest since February,” Mr Qureishi said.
On the price front, cost pressures intensified for the second successive month in May. The latest increase was solid overall, but remained weaker than the average over nearly two-and-a-half years of data collection. Higher purchase prices were behind the overall rise, with firms decrying greater raw material and transportation costs. Charges also rose more quickly, climbing to a five-month high.
Jack is a business and society writer at the Kenya Free Press