In February 2024, business conditions in Kenya saw a notable improvement, as reported by the Stanbic Bank Kenya PMI®. This index, which measures purchasing managers’ perceptions of various economic factors, signaled a positive shift in the private sector.
Positive Signs Amidst Uncertainty
- Expansion in Business Activity: After six months of stagnation, both business activity and new orders saw a welcome increase. This upturn suggests a potential revitalization of economic momentum within the private sector.
- Subdued Price Pressures: One of the most significant observations was the easing of inflationary pressures, resulting in a moderation of input costs. Lower fuel prices played a crucial role in this, contributing to the softest increase in output prices in eighteen months.
- Rising Employment Levels: Despite overall uncertainty, employment levels rose, indicating cautious optimism among businesses. Higher new order intakes prompted firms to hire more staff, albeit modestly, marking the fastest increase since the previous August.
Concerns Linger Amidst the Positivity
- Low Confidence Levels: Despite the positive indicators, confidence regarding future activity plummeted to a survey low. This decline reflects a pervasive sense of uncertainty among businesses regarding sustained growth in the foreseeable future.
- Sectoral Variances: While some sectors, such as agriculture, manufacturing, and services, experienced growth, others like construction and wholesale & retail faced challenges. Sales declined sharply in these segments, underscoring the sectoral variances within the economy.
Insights from Christopher Legilisho
Christopher Legilisho, an economist at Standard Bank, provided valuable insights into the February data. He highlighted the expansion in private sector activity across various industries. Legilisho noted improved consumer demand as a driving force behind increased output and new orders.
However, despite the positive momentum, expectations for 2024 remain subdued. Legilisho pointed out that the index for future expectations hit its weakest level on record, indicating prevailing uncertainties in the economic outlook.
Pricing Dynamics and Cost Management
On the pricing front, firms observed a moderation in both input and output price pressures. Factors such as declining fuel prices and a strengthening currency contributed to this trend. While staff costs remained flat, staffing levels increased for the second consecutive month, reflecting cautious optimism amidst ongoing challenges.