Kenyan firms saw a renewed improvement in performance in July as the lifting of regional border controls led to a rise in output and new business.
The July Purchasing Managers’ Index (PMI) compiled by IHS Markit rose to 54.2, higher than 46.6 in June signalling a strong uplift in overall business conditions the highest rise in 13 months.
Readings above 50 signal an improvement in business conditions, while readings below that indicate deterioration.
Firms indicated that the lifting of Covid-19-related restrictions helped to generate higher sales in July, most notably from the removal of regional border controls.
Customer demand was reportedly much greater than in June, leading to a surge in new business that was the most marked for nearly two years.
Export sales were also up steeply as Kenyan businesses saw higher new orders from European countries. In response, output levels expanded at a sharp pace at the start of the third quarter, one that was the fastest since May 2018.
It was also the first upturn for seven months, representing a partial recovery in activity since the depths of the Covid-19 pandemic.
Purchasing activity rose solidly as firms looked to build up stocks and prepare for a return to normal levels of demand. Relaxed travel restrictions helped firms to receive inputs quicker than in June, as delivery times improved at the fastest rate for 16 months.
Purchasing activity rose solidly as firms looked to build up stocks and prepare for a return to normal levels of demand. Relaxed travel restrictions helped firms to receive inputs quicker than in June, as delivery times improved at the fastest rate for 16 months.
Even so, workforce numbers continued to fall in July, albeit at the weakest pace in the current five-month run of job shedding.
There were indications of slight pressure on capacity, while some panelists commented that the workforce needed to be expanded.
Purchase prices rose at a stronger, but still modest, rate during July, amid numerous mentions of short supply of some raw materials. Consequently, firms raised output charges for the first time since March.
Whilst growth returned in the Kenyan private sector during July, businesses were still relatively downbeat regarding the year-ahead outlook.
The level of sentiment was positive, albeit only fractionally higher than the record low seen in August 2016.
Several firms highlighted plans to expand their businesses in the coming year but often cautioned that these plans depended on an end to the pandemic, which remained largely uncertain.
Commenting on the improved PMI, regional economist E.A at Stanbic Bank Jibran Qureshi said the removal of county travel restrictions supported output and business sentiment in July.
”This enabled firms to receive inputs much quicker, as supplier delivery times improved. In any case, firms remain wary of the uncertain outlook and thus future expansion plans are still not firmed up,’’ Qureshi said.