Kenya's private sector activity expanded significantly in March.
Kenya's private sector activity grew at the fastest pace in 10 months in March on the back of a sharp rise in business inflows, pointing to a sharp improvement in business conditions and a cushion against job losses.
During the just-ended month, businesses witnessed enhanced demand for goods and services which, in turn, drove a solid increase in purchase orders of inputs, defying a modest rise in input prices recorded during the period.
The Stanbic Kenya Purchasing Managers Index (PMI) – a measure of monthly private sector activity such as output, new orders, and employment – increased to 51.7 last month up from 50.6 in February, and marked the highest reading since May last year when it stood at 51.8.
A reading above 50 signals improvement in business activity while that below denotes a deterioration.
“Kenyan firms, especially, highlighted a sharper increase in new business inflows in the latest survey. The rate of growth accelerated to its fastest in just over two years,” Stanbic said in the report.
“The uplift in sales supported a faster expansion in business activity across the private sector economy in March. Output increased at the quickest pace since May 2024, with firms generally indicating that they were able to boost activity to match order volumes.”
The survey notes that the manufacturing sector was the only laggard during the month after it witnessed fresh contractions in production and new orders.
The overall positive performance, however, failed to trigger hiring growth which remained subdued during the period as business leaders maintained a meek assessment of future business activity.
“The March Kenya PMI shows a private sector with faster growth in output and new orders, assisted by increased customers, good weather, and sustained marketing,” Christopher Legilisho, chief economist for South African-based Standard Bank which is Stanbic’s parent firm, said in the March PMI report.
“However, the upturn was not broad-based, with some firms and certain sectors feeling the downside of weaker consumer demand.”
In recent months, businesses and households have been battling a biting scarcity of money in circulation in an economic setting where the banking sector cut lending to the private sector amid high interest rates offered on government securities.
The Central Bank of Kenya (CBK) has, however, moved to reign in on the lenders to cut their rates after it reduced the benchmark rate four times by 2.25 percentage points to 10.75 percent between August 6 last year and February 5 this year.
The rise in new business orders in March therefore signals a recovery in money circulating in the economy, which will further boost sales in the coming months.
Businesses recorded a quickened duration of average time taken for inputs to arrive, attributed to better commodity supply and enhanced timeliness in payment to vendors.
They were also able to put more inputs in warehouses due to stronger sales volumes.
kmwangi@ke.nationmedia.com
