6 December 2018

Kenya: Jobs Stagnate as November Output Falls

Private firms created fewer jobs in November compared to the previous month saddled by a slowdown in output growth and new orders in line with subdued demand for Kenya's exports, the latest industry data shows.

Exports demand fell to its lowest in 10 months at the end of November forcing companies to slow down on hiring unlike in October when new jobs were created at the fastest pace in six months, according to Stanbic Bank Kenya's Purchasing Managers' Index (PMI).

"The expansion of export demand fell to its weakest in 10 months. Firms lowered the pace of job creation, but at the same time raised purchasing activity at the sharpest pace since June," the survey found.

PMI, which is based on data from purchasing executives in about 400 private sector companies, dropped to 53.1 in November from 54.0 in the previous month.

The outcome is in line with the finding that the private sector registered the smallest increase in new business from abroad in 10 months.

Stanbic reckons that even though operating conditions improved solidly in November, growth in output and new orders were marginally below those seen in October to sustain additional jobs.

"Similarly, the rate of accumulation in backlogs of work eased to a three-month low, indicating that weaker demand growth had reduced the pressure on unfinished orders."

The finding breaks an earlier trend where backlogs of work rose for three successive months to October, creating room for more hiring.

Vendor performance

The survey, however, found that vendor performance improved substantially in November, shortening delivery times at the fastest pace since August. This was associated with high competition among suppliers.

Regional economist for East Africa at Stanbic Bank, Jibran Qureishi, said purchasing activity had remained solid despite the slight drop in PMI index.

This, he explained, is pegged on costs remaining relatively muted despite the tough transport rules that had raised costs earlier in the month even as electricity and food prices declined.

"The aforementioned factors, in addition to lower international oil prices, should continue to keep costs suppressed for the private sector over the coming month and thus underpin purchasing activity," he said.

The PMI index is based on data compiled from purchasing executives drawn from diverse sectors such as agriculture, mining, manufacturing, construction, retail and services.

PMI above 50.0 signals improvement in private sector conditions from the previous month while readings below 50.0 indicate deterioration.

Kenya

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