6 January 2016

Kenya: Private Sector Expansion Accelerated in December - Report

Kenya's private sector expansion gathered momentum in December, having stalled somewhat just two months earlier in 2015, according to the latest CfC Stanbic Bank Purchasing Managers' Index™ released on Wednesday.

According to the index, detailing business activity, growth rates in output, new work and employment all accelerated towards the tail end of 2015, as did that for input buying.

It shows that activity growth quickened to a one-year high, helped by a combination of stronger client demand and the opening of new branches.

"The private sector closed the year on a strong note as the Purchasing Managers' Index™ (PMI) rose to an eight-month high of 55.5 from 53.7 in the previous month and a survey-record low of 51.7 in October," said the report, noting that the latest rise in output was "the most marked" seen throughout 2015.

On the back of the expanded business activity captured by the index, CfC Stanbic Bank regional economist Jibran Qureishi projects the economy to look up this year.


"We expect the Kenyan economy to expand by 5.3 per cent in 2015, predicated on a robust performance mainly in the construction sector. Likewise, despite the ongoing challenges in the tourism sector for the most part of 2015 and erratic weather patterns that suppressed agricultural production in the first half of the year, the Kenyan private sector has weathered the storm in what we think was an incredibly challenging global environment in 2015," said Mr Qureishi.

The World Bank has predicted that the economy would expand by 5.7 per cent in 2016 down from an earlier projected 6.6 per cent.

The index shows that new business also exhibited growth, largely aided by enhanced marketing and higher new export work. Foreign orders, it said, rose only modestly following a stagnation in the prior month.

Growth of the sector as a whole was boosted further by faster job creation in December. The index shows the rate of hiring picked up to the quickest in seven months, as firms redoubled their efforts to expand operating capacity.

On the price front, total input costs rose more slowly in December. The easing centred on a slightly weaker rise in purchase prices, as salary growth hit a four-month high.

The overall rate of inflation was nevertheless solid, as a result of higher raw material and transportation costs caused in part by the weakening of the Kenyan shilling.


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