Private sector activity records an improvement in May- Survey

Kenyan private sector firms have recorded an improvement in operating conditions in May according to survey data from the Stanbic Bank Purchasing Managers’ Index (PMI)

The upturn in activity for the sector is on the back of a sharp deterioration of operating conditions in April as the PMI sunk below the 50.0 confidence threshold to hit a near two year low of 49.3.

Headline PMI reading across May jumped to 51.3 in May, the fastest improvement since the opening of the year signalling a notable improvement in the health of the Kenyan private sector.

“Activity in the Kenyan private sector recovered in May after the agriculture sector slowdown witnessed over the past couple of months,” noted Stanbic Bank Regional Economist Jibran Qureishi.

Higher energy and power costs however pulled back gains for the private firms, this as the inflationary factors pushed up both input prices and the Purchases Prices Index (PPI).

Purchase prices for instance recorded their fastest increase in seven months as higher importation fees and rising fuel prices impacted the output costs.

Staff costs however remained constant during the month with only five percent of surveyed respondents raising wages across May.

Kenyan businesses resumed employment growth across May in response to increasing demand even as firms failed to keep up with new orders as backlogs grew at their fastest rate since September 2018.

Companies have given their strongest outlook for output in nearly five years basing their optimism on the hopes for greater economic stability.

Economist Jibran Qureishi expects the success of the presidential direvtive on the prompt payments of pending bills accruing to government to offer more stimulus to growth.

“Should the government clear arrears owed to the private sector as promised on Madaraka day, private sector activity could benefit from a huge boost,” he added.