Inside Politics

Private sector maintains steady growth in August

Friday, September 4th, 2020 00:00 |
The flower industry. Photo/PD/FILE

Steve Umidha @UmidhaSteve

Kenya’s private sector recorded a second straight month of growth in August, with output and new orders rising solidly amid loosened travel restrictions. 

The latest Stanbic Bank Kenya Purchasing Managers Index (PMI) Survey posted 53, signaling continued improvement in business conditions in August.

Readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show a deterioration.

Although PMI fell to 53 from 54.2 in July, according to the survey, still, the reading indicated a second straight month of growth in the private sector,with output and new orders rising solidly amid looser travel restrictions. 

Among the restrictions that were implemented include a ban on international flights into Kenya as well as the cessation of movement into and out of Nairobi, Mombasa, Kilifi and Mandera counties.

The survey indicates that due to easing of travel bans, exports grew at a record rate, although job numbers during the preiod fell amid efforts to cut wage costs. 

Sentiment, however, improved for the first time since February, but remained relatively weak,” it adds.

Notably, reads in part the latest PMI, export sales growth reached a new record high, as the reopening of international travel supported an uplift in tourism. 

“Firms also reported that new orders from Europe increased strongly,” it adds.

The rise in demand reportedly helped businesses to expand and recover some output lost during the lockdown period.

Companies increased their purchasing activity solidly midway through the third quarter, amid efforts to build up stocks as firms anticipate demand will grow further in the coming months.

Purchased items were delivered at a quicker pace, as lead times shortened for the third month running.

Higher input demand led suppliers to raise their prices during August, with the rate of purchase cost inflation accelerating to a four-month high. 

Employment rate

Fuel prices also increased at some companies. Equally, staff costs fell for the fifth month in a row, although at the softest pace. However, employment rate continued to fall in August, reflecting concerns that costs remained too high. 

The decrease in jobs was, however, slightly faster than in July, but only marginal overall.

According to the latest Quarterly Labour Force Report by Kenya National Bureau of Statistics (KNBS), Kenya’s unemployment rate increased to 10.4 per cent in the second quarter of 2020, compared to 5.2 per cent recorded in the first quarter of 2020. 

This translated to a more than double increase in the number of unemployed individuals in the country from 878,459 during the second quarter of 2019 to 1,841,918 people as at the close of June this year.

In July, PMI increased to 54.2 from 46.6 in the previous month. 

The reading pointed to the first expansion in the country’s private sector since December and at the quickest pace in over a year, amid the lifting of Covid-19 related restrictions and the removal of regional border controls. 

Both output and new orders bounced back and grew the most in over two years, in particular, due to higher new orders from European countries. 

Firms also said they received inputs faster than in June, as delivery times improved at the fastest rate for 16 months.

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