Central Bank of Kenya headquarters in Nairobi /FILE
Kenya's private sector activity touched a five-year high in
November on ease of borrowing, granting traders access to cheap loans while a stable shilling lowered import costs.
The Central Bank of Kenya has consistently cut the base lending rate for
the past 14 months, slashing a further 25 basis points in October to 9.25 per
cent.
Early this week, banks adopted a new loan pricing formula that prices credit more transparently by separating the reference rate from the institution-specific
premium.
Fees are then added to calculate the total cost of credit. This structure is
meant to enhance market discipline, align Kenya with global benchmark
practices, and improve the clarity of loan pricing for customers.
The shilling, on the other hand, has held steady at 129.30 units against the greenback for more
than a year.
Firms experienced improved customer sales, helped by
relatively soft inflationary pressures, as well as successful new product
launches and marketing campaigns.
Purchases of inputs rose, while employment growth quickened
from October.
The Purchasing Managers’ Index (PMI) hit 55 in November, up
from 52.5 in October and the highest since October 2020.
Readings above 50 signal an improvement in business conditions
from the previous month, while readings below 50 show deterioration.
According to the report by Stanbic Bank, the upturn was
mainly driven by a much sharper increase in sales volumes compared to the
previous survey period.
Surveyed companies frequently noted that improved purchasing
power among customers contributed to higher sales volumes. This trend was
partly linked to a moderation in inflationary pressures, as evidenced by the
survey data.
In fact, selling charges increased only slightly and at the slowest rate since August, while input costs rose to the smallest extent in 18 months.
Volumes of new business rose for the third consecutive month
in November, with the pace of expansion climbing to a sharp rate that was the
most pronounced in just over five years.
All sub-sectors experienced growth, as companies highlighted
improved client purchasing power, successful marketing strategies, increased
referrals, and the launch of new products.
When adjusted for seasonal variation, the employment index recorded above 50 for the tenth consecutive month in November, indicating
another rise in staff numbers at Kenyan companies.
Moreover, the rate of job creation was the second fastest in
over two years. All five monitored sectors saw an increase in employment since
the previous month.
Companies again managed to deplete their backlogs midway
through the final quarter of 2025. Outstanding business has fallen in each of
the past six months. Four out of five sectors saw a drop in backlogs since October.
However, a rise in work-in-hand among manufacturers meant
that the overall fall was the slowest since June.
Consistent with a more pronounced rise in new orders,
November data indicated an accelerated increase in input purchases across the
private sector.
“This growth followed a renewed expansion in October, with
the rate of increase reaching its fastest in just over five years,’’ the report
reads.
Panelists attributed the surge to higher sales, new project
initiatives and greater client activity.
The amount of time taken for inputs to be delivered to
Kenyan businesses shortened further during the latest survey period.
Respondents tended to see lead times improve because of
increased competition among suppliers, which encouraged faster delivery to
maintain business relationships and contracts.
Some vendors also delivered more quickly to meet
urgent business needs, according to comments.
With purchases rising and lead times shortening, businesses saw a solid increase in their stock levels in November.
The rate at which inputs were accumulated was the second
quickest in almost three years (following June). Stocks rose in all categories,
with the greatest expansion in construction.
“Inflation expectations are anchored, as echoed by the survey.
Kenyan businesses reported softer increases in input prices, purchase prices
and output prices, while wage costs were unchanged,’’ said Christopher Legilisho, economist
at Standard Bank.
Even so, firms still note rising material prices and higher taxation as impacting their margins.
