The high cost of raw materials as a result of inflation drove firms to increase commodity prices at the quickest pace last month since January.
The monthly Stanbic Kenya Bank Purchasing Managers’ Index shows operations by private firms improved to 51.3 last month from 49.3 in April.
This was the first increase in the headline index in five months and the fastest improvement in business conditions since January
“Activity in the Kenyan private sector recovered in May after the agriculture sector slowdown witnessed over the past couple of months. However, both input and output costs rose sharply in May perhaps due to higher power and transport costs,” Stanbic Bank regional economist Jibran Qureishi said.
He added that should the government clear arrears owed to the private sector as promised on Madaraka day, private sector activity could benefit from a huge boost.
The survey shows new orders rose over the review period resulting in an expansion of output levels. However, the increase was marginal and weaker than that seen throughout the last sequence of growth, which ended in March.
While most businesses were able to raise activity with higher demand, the report shows continuing cash flow problems in the economy may have dampened production.
“The rate of inflation was the highest since last October, as new taxes such as importation fees on commodities came into effect,” the report stated.
