MOMENTUM

New orders drove September private sector growth - index

The good performance by the private sector during the month resonates with Central Bank of Kenya’s analysis for the sector, which has been constrained by the interest cap law regime that came into effect in 2016

In Summary
  • The September data recorded a stronger uplift in new orders from abroad, after August pointed to the weakest growth in 21 months
  • Readings above 50 points signal an improvement in business conditions on the previous month, while readings below that show deterioration
Stanbic Bank’s regional economist Jibran Qureishi./FILE
Stanbic Bank’s regional economist Jibran Qureishi./FILE

Kenya’s private sector activity grew for the fifth straight month in September, driven by new business and accelerated sales.

The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) for manufacturing and services rose to 54.1 in September from 52.9 in August, level with July's figure and signaling an improvement in the health of the Kenyan private sector.

 

Readings above 50 points signal an improvement in business conditions on the previous month while a drop shows the converse. 

“Private sector activity is showing signs of momentum, although panelists continue to highlight cash flow issues that they face,” Jibran Qureishi, regional economist for East Africa at Stanbic Bank said.

He said that the September data recorded a stronger uplift in new orders from abroad after August pointed to the weakest growth in 21 months. The rate of expansion was solid and broadly in line with the series average.

After adjusting for seasonality, the New Orders Index rose to its highest in 13 months, as several firms reported an increase in client numbers since August. Many commented that they received new customers through referrals.

The rate of expansion was solid and broadly in line with the series average. Panellists mentioned higher sales to a number of foreign clients, including ones in Tanzania, Congo and Burundi, as well as the US and Europe.

Employment conditions in the country’s private sector improved solidly at the end of the third quarter, with a number of firms hiring additional labour. Many linked this to greater workloads.

Even so, the seasonally adjusted Suppliers' Delivery Times Index fell in September for the first time in three months, to signal a solid, but slower, reduction in lead times faced by Kenyan firms.

 

Panellists found that high competition among suppliers and greater availability of inputs were key reasons for the latest improvement in vendor performance.

The good performance by the private sector during the month resonates with Central Bank of Kenya’s analysis for the sector, which has been constrained by the interest cap law regime that came into effect in 2016.

The recent CBK’s Monetary Policy Committee meeting said the sector poised for further growth, with private sector lending hitting 6.3 per cent in the 12 months to August, compared to 6.1 per cent in July.

It was supported by ongoing reforms in the banking sector to strengthen the credit information sharing mechanism and promote transparency in pricing.