Kenya’s private sector performance almost touched a 30-month high in September, exhibiting unexpected resilience despite the effects of Covid-19.
The Performing Managers Index (PMI) hit 56.3 points, the highest reading since April 2018, indicating a sharp improvement in the performance of private sector in monthly data released by Stanbic Bank.
The upturn is attributed to the government’s decision to relax Covid-19 restrictions.
The index rose from 53 in August and marked the third successive expansion since the downturn caused by the COVID-19 outbreak
Readings above 50 points signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
Jibran Qureishi, head of Africa Research at Stanbic Bank said this will gradually continue to support activity into the end of the year.
“That said, we ought to be cautious around the possibility of a second wave globally that could dampen external demand again,” Quresh said.
Customer demand expanded at the sharpest rate since January 2016, leading to a a rise in backlogs.
As a result, job numbers were broadly stable after falling in the six previous months. Nevertheless, future expectations dipped to their lowest since the series began in 2014.
The easing of lockdown restrictions during the third quarter of the year saw firms release pent-up demand as clients largely returned to markets.
New orders grew for the third month running, helped by a further increase in foreign orders, particularly from Europe and the Middle East.
Nearly 36 per cent of respondents saw higher inflows of new business from the previous month, with many citing a rise in customer demand as Covid-19 infection rates have slowed.
Notably, the rise in total sales was the strongest since January 2016. Subsequently, output levels expanded at a sharp pace in the latest survey period, with companies also steeply increasing the volume of inputs purchased.
Suppliers were able to deliver more quickly for the fourth month in a row, although the rate of improvement was hampered by traffic issues and the short supply of some products.
Rising demand led to a solid uptick in backlogs of work during September, which led some firms to hire new workers. This counteracted job cuts at other firms, amid efforts to reduce expenses.
As such, employment was broadly level during the month, following a six-month run of decline. Input cost inflation softened in September but remained solid overall as firms cited price rises for fuel and commodities, in addition to higher logistics costs.
Firms often passed these costs onto customers, as output charges rose for the third month in a row. Despite stronger growth, companies were less confident about the 12-month outlook in September.
The level of sentiment was the weakest in the series history, with only 27 per cent of panelists expecting output to continue expanding.
Despite plans to raise investment and open into new markets, firms were concerned that the economy could face a further setback from the pandemic.