Business conditions in Kenya improved in September for the first time since July, but firms are still struggling to turn stronger sales into higher production because of rising fuel and transport costs.
The Stanbic Bank Kenya Purchasing Managers’ Index climbed to 51.3 from 49.7 in August. A reading above 50 signals improvement on the previous month. September’s figure matched July as the joint-fastest pace since January.
Demand up, output still down
New orders rose for a fourth straight month. Firms credited better market conditions, customer referrals, marketing campaigns and cash injections. Output, however, contracted for a seventh consecutive month, although the fall was the smallest in that run.
“The rise in Stanbic Kenya’s headline PMI in September points to a demand-led improvement in private sector conditions rather than a broad-based recovery in activity,” said Christopher Legilisho, an economist at Stanbic Bank.
He said higher fuel, transport and agricultural input costs, together with material shortages, “limited firms’ ability to convert sales into production.”
About 30 per cent of the roughly 400 firms surveyed reported higher input costs, against one per cent that saw costs fall. Companies passed much of this on. Selling-price inflation hit its second-fastest pace since November 2023, beaten only by June this year.
Hiring and stock building resume
There were signs that firms expect demand to hold. Purchasing activity picked up after four months of decline, inventories of inputs rose for the first time since June, and employment increased as backlogs of work grew for a fourth month.
Manufacturing, construction and services all grew. Agriculture and wholesale and retail remained under pressure, which fits with the drought-driven food shortages that have pushed up prices of milk and other staples.
Official data points the same way on costs. The Kenya National Bureau of Statistics put annual inflation at 6.8 per cent in September, up from 6.6 per cent in August, with transport prices 15.6 per cent higher than a year earlier.
Business confidence slipped to a four-month low but remains among the strongest readings in more than five years. Firms that expect better trading cited capacity expansion, investment in technology and new products.
The next test comes on October 14, when the energy regulator announces pump prices for the coming month. Another fuel increase would squeeze margins that are already thin.
Sources: The Eastleigh Voice | Business Today | Stanbic Bank Kenya
Photo: Tall Black / Wikimedia Commons (CC BY-SA 4.0)
