Companies in Kenya booked additional workforce as private sector activity reported moderate improvement for the first time since February this year.
Stanbic Purchasing Managers’ Index (PMI) expanded from 50.0 in June to 51.3 in last month signalling a moderate improvement in the private sector’s performance after several months of challenging conditions.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.
“Kenya’s PMI increased in July as conditions in the private sector improved. The headline gain was mainly driven
by stronger new orders and modest short-term hiring, implying that firms are responding to pockets of demand
and near-term workload pressures. However, output stayed subdued as elevated inflation, higher input costs
and tight cash flows constrained production,” said Christopher Legilisho, Economist at Stanbic Bank.
According to the survey by the bank, despite Kenyan firms suffering contraction in output, supply chain disruptions, and elevated cost pressures, higher orders forced companies to hire additional workforce.
The employment market improved in July after two consecutive months of decline as companies resorted to short-term hiring to address mounting workload.
“At the same time, rising backlogs point to supply-side frictions, with delayed import deliveries limiting firms’ ability
to convert new orders into actual output. Stocks purchased and inventories were broadly stable, implying that firms
took divergent approaches to increasing orders: some drew down existing stocks, while others rebuilt inventories
in anticipation of firmer demand,” added Legilisho.
Nonetheless output was affected by high inflation rate where 37% of companies reported higher operating expenses, driven primarily by surging transportation costs, elevated fuel prices and material shortages stemming from the Middle East conflict.
