- Output levels increased for the first time since February, with the rate of growth being the fastest in twenty months.
- Although input prices dropped only modestly, the reduction was the fastest observed outside of Covid-19 lockdown-affected months.
Fuel prices reductions coupled with a stronger shilling led to a drop in import costs further pushing down overall input prices in May, after the first decrease in nearly four years in April.
The Stanbic Bank Kenya's Purchasing Managers’ Index (PMI) rose to 51.8 in May 2024, up from 50.1 in the previous month, indicating further improvements in the Kenyan private sector.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.
Output levels increased for the first time since February, with the rate of growth being the fastest in twenty months.
"The latest headline PMI reading of 51.8 marked the index's best performance since January 2023. It signalled a moderate improvement in the health of the private sector economy,'' the report reads.
According to Christopher Legilisho, an economist at Standard Bank, the strengthening of private sector conditions was largely due to a turnaround in inflationary pressures at Kenyan companies.
“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.''
The latest survey data points to a solid increase in output, with the upturn being the strongest since September 2022.
Lower fuel prices supported activity growth at many businesses, with some firms also commenting on increased new orders.
Output rose in the services, manufacturing and wholesale and retail sectors, but fell in agriculture and construction, often due to heavy rainfall.
New business inflows grew for the first time in three months during May, which firms mainly attributed to higher client referrals, marketing and promotional offers.
The rate of sales growth was the fastest recorded since the start of 2023 but remained weaker than the series average. Increases were centred on the services, manufacturing, and wholesale & retail categories.
The seasonally adjusted Employment Index remained in growth territory in May, signalling a fifth successive monthly rise in job numbers by Kenyan companies.
The index was little changed from April, however, and consistent with only a marginal rise. Firms generally reported hiring casual employees to support new business and marketing.
The outstanding business faced by Kenyan firms increased for the third month in a row during May.
This was shown by an above-50.0 print in the seasonally adjusted Backlogs of Work Index. Despite quickening slightly, the rate of accumulation was slight overall.
Kenyan companies purchased a larger volume of inputs for the second consecutive month during May. The solid expansion was largely attributed to an uptick in client demand and higher input requirements.
In tandem with the trend seen for output, the rate of purchasing growth was the quickest since September 2022.
Suppliers' delivery times on inputs continued to shorten during May, extending the run of improving vendor performance to eight months.
Although slight overall, the rate at which lead times shortened was the most marked observed since January. Faster deliveries were witnessed in all monitored sectors except wholesale and retail.
Delivery times on inputs continued to shorten during May, extending the run of improving vendor performance to eight months.
The rate at which lead times shortened was the most marked observed since January.
Quicker deliveries were seen in all monitored sectors except wholesale and retail.
Stocks of purchases Kenyan businesses raised their inventories of purchased items further in May, often to provide buffer stocks according to anecdotal evidence. Whilst modest, the rate of expansion accelerated to the quickest since last October.
Overall input costs in the Kenyan private sector fell for the second successive month in May, representing a sharp turnaround after a period of unprecedented cost pressures in late 2023.
Although input prices dropped only modestly, the reduction was the fastest observed outside of Covid-19 lockdown-affected months.
Agriculture was the only sector to post an increase in costs during May. Purchase prices dropped for the second month running following a record decline in April.
Notably, this marked the first time in the survey's history that purchase prices have fallen in successive months. Firms mainly commented on a drop in fuel prices and lower import prices due to improved exchange rates.
Staff costs increased slightly for the second month in succession during May, following six months of relative stability.
The rate of pay inflation crept up towards the series trend. Nevertheless, the vast majority of respondents (99 per cent) saw no change in labour expenses over the month.