A sharper upturn in new business at Kenyan companies fueled a stronger improvement in operating conditions during September, the latest Markit Stanbic Bank Kenya Purchasing Managers Index (PMI) survey revealed on Thursday.
Sales growth accelerated to a 13-month high, leading firms to expand their output at a quicker, albeit modest pace.
Workforce numbers also increased, as firms remained highly optimistic for future activity.
At the same time, cost pressures weakened to a near two-year low, while output price inflation also eased.
PMI readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
The headline reading rose from 52.9 in August to 54.1 in September, level with July’s figure and signalling a solid improvement in the health of the Kenyan private sector.
This extended the current sequence of growth to five months.
Contributing to the uptick was an even sharper increase in new business in September. The rate of expansion climbed to the strongest for 13 months, with several firms reporting higher client numbers since August.
“Private sector activity is showing signs of momentum, although panellists continue to highlight cash flow issues that they face,” said Stanbic’s regional economist East Africa, Jibran Qureishi.
“In addition to the current stock of arrears owed to the private sector, the interest rate capping law could also hold back firms from flourishing on a multimonth basis,” he added.
Export demand also rose at a quicker pace, albeit still the second-slowest in nearly two years, with the survey noting 1greater trade with customers in Tanzania, Burundi and Congo, as well as markets such as the US and Europe.
Nonetheless, the survey pointed out that output at Kenyan firms rose only modestly during September, as many companies continued to struggle with cash flow problems.
Meanwhile, job numbers grew solidly over the course of the month, with latest data signalling the joint-quickest rise in employment since December 2016, noted the survey.
The PMI is based on data compiled from a survey sampling approximately 400 private sector companies, which have been carefully selected to accurately represent the true structure of the Kenyan economy, including agriculture, mining, manufacturing, services, construction and retail.
JK/abj/APA