Stanbic Bank Kenya PMI Reveals Rising Business Optimism Amidst Sectoral Divergence

Kenyan businesses witnessed a significant upturn in November, with the Stanbic Bank Kenya Purchasing Managers’ Index™ (PMI®) rising to 50.9, marking the highest reading in six months. This comes as new business orders surged and sales growth accelerated, particularly in the services and wholesale & retail sectors.

According to the report by S&P Global, the PMI reading of 50.9, up from October’s 50.4, indicates a sustained expansion in the private sector. A score above 50 signals an improvement in business conditions, while a figure below 50 indicates contraction.

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The rise in new business orders, which grew at the fastest pace since May, has been attributed to improved consumer spending and increased travel. Despite this, the recovery was uneven, with growth concentrated in services and wholesale & retail, while agriculture, manufacturing, and construction sectors recorded declines in new orders.

“This surge in new orders reflects increased consumer confidence and higher travel-related spending,” commented Christopher Legilisho, Economist at Standard Bank. “However, the recovery remains sector-specific, with some key industries still lagging behind.”

In response to increased demand, businesses ramped up output and purchasing activity at the fastest rate since September 2022. However, this expansion has come with rising costs. Input price inflation climbed to a three-month high, driven by higher taxes and increased operational expenses. Consequently, selling prices also rose at their fastest pace in nine months.

“All five broad sectors experienced rising costs, compelling businesses to pass on these costs to consumers,” Legilisho noted.

Employment levels remained stable for the second consecutive month, though job creation slowed compared to October. Companies reported hiring primarily to manage increased workloads and support expanded marketing efforts. However, most businesses opted to maintain current workforce levels, reflecting a cautious approach amidst cost pressures.

Supplier delivery times continued to improve, though marginally, supported by enhanced competition among vendors and better material supply. Firms also increased their inventory levels to meet growing demand, though the stock accumulation rate was the slowest since August.

Despite the current economic momentum, business confidence remains subdued. Only 8% of surveyed firms anticipate increased activity over the next 12 months. Optimism is largely driven by plans for new marketing initiatives, digital technology adoption, and branch expansions.

“The cautious outlook stems from ongoing cost pressures and sectoral disparities in growth,” said Legilisho. “While businesses are navigating the current environment well, the long-term sentiment remains conservative.”