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Private sector activity stronger in May on rising orders

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Nairobi Expressway. PHOTO | State House

Kenya’s private sector business conditions improved sharply in May on account of easing inflation rate which boosted production and sales, Stanbic Bank Kenya has said.

The headline Purchasing Managers’ Index rose to 51.8 in May, the highest since January this year compared to 50.1 in April.

“Private sector activity was surprisingly strong in May, implying a further improvement in economic activity, as we had expected to see some impact from the recent floods. Output and new orders recorded strong gains in May as firms reported increased consumer demand,” said Christopher Legilisho, Economist at Standard Bank.

The bank noted expansions in the services, manufacturing, and wholesale and retail sectors, though heavy rains saw output declining in the agricultural and construction sectors.

During the month, Kenyan businesses experience ease in inflationary pressure as inflation rate fell to 5pc in April leading to lower input prices recorded since pandemic lockdown in 2020.

The bank says businesses also experienced lower fuel prices and reduction in impost costs as Kenya shillings strengthened against the US dollar.

As a result of easing inflation, there was increased spending among consumers forcing companies to ramp up production to meet sales demand.

During the month, firms reported hiring casual employees to support new business and marketing.

“Job creation continued for a fifth successive month amid larger workloads and prospects of new business. Firms also purchased larger quantities, raising their inventory levels and improving their buffers,” added Legilisho.

PMI readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.

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