The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) signalled a return to expansion in September, rising sharply to 51.9 from 49.4 in August and moving above the neutral 50.0 threshold for the first time since April.
This marks the first month of improved business conditions in five months, driven by solid expansions in output, new orders, and employment. An easing of supply-side pressures also led to the steepest fall in delivery times in four years.
Key Drivers: Output, New Orders and Employment
The PMI survey attributes the resurgence in the private sector to simultaneous gains in key underlying indicators:
- Output: About 33 per cent of surveyed firms reported growth in output in September, compared to 23 per cent that saw declines. A number of businesses cited successful marketing campaigns and investment in product/service innovation as sources of growth.
- New Orders: After four straight months of contraction, new business bounced back. The improved inflows supported renewed confidence among firms to ramp up activity.
- Employment: Companies responded to stronger demand by hiring staff, driving the fastest rise in employment since May 2023.
- Backlogs: With improved capacity and output, firms reduced their backlog of work for the fourth consecutive month.
Despite this positive momentum, purchasing activity continued to contract in September. Some companies still held off on input orders, citing weaker demand in prior months.
Supply Factors and Price Trends
Supply-chain pressures eased, leading to a notable shortening of supplier delivery times — the strongest pace in four years.
Meanwhile, input price inflation moderated, slowing from prior months’ peaks. However, many firms passed on cost pressures to customers, raising selling prices more aggressively in September.
Sectoral Weakness: Construction Remains Under Pressure
Most sectors contributed to the recovery, but construction was a notable exception. The industry recorded sharp declines in output during September, dragging on the broader rebound.
Expert Commentary & Outlook
Christopher Legilisho, Economist at Standard Bank, commented:
“Business conditions expanded in September, implying the start of a recovery after the disruptions that followed protests in Q2. New orders and output strengthened as consumer demand improved, despite some firms reporting caution from clients due to still challenging economic conditions. Employment meanwhile increased due to gains from new orders and output. However, low sales in recent months led to sustained weakness in firms’ buying decisions; quantities purchased fell in September, although inventory stocks rose.”
Legilisho further noted that although business prospects for the year ahead remained positive, they were still muted compared to long-term norms.
Implications for Kenya’s Economy
The September PMI rebound offers a potential turning point in Kenya’s private sector, after months of contraction influenced by political protests and cost pressures. The combined rise in output, orders and employment suggests that demand is cautiously stabilising.
Yet, challenges remain. The continued sluggishness in input purchasing underscores lingering caution. Moreover, sustained pressures around taxation, commodity costs, and consumer affordability may constrain the pace of recovery.
