Stanbic Bank Kenya Purchasing Managers Index (PMI) which tracks private sector sentiment edged up to 54.6 in the month of August.
According to the statement released by the lender, the output, 25 percent of index weight, rose for the ninth consecutive month.
The consistent rise was buoyed by higher inflows of new orders, 30 percent of index weight, which outpaced the six-month low print recorded in July.
According to the PMI, employment, which accounted for 20 percent of index weight, posted a modest uptick to meet output requirements.
Overall, PMI has averaged 54.79 in the first eight months of the year against 48.53 recorded in a similar period last year uplifted by improving economic conditions.
Nonetheless, the impact of recently implemented 16 percent Value Added Tax (VAT) on petroleum products is seen as a headwind to the private sector in the near-term.
The 16 percent VAT on petroleum products has already led to fuel shortage across the country as truckers downed their tools wanting the government to suspend the implementation of the law.
Market Turnover Expectations
Market analysts at Genghis Capital expect turnover to ease further in Thursday’s session from prior 1.7 billion shillings after the auction meeting proposed to re-open the FXD1/2018/10 and FXD2/2018/20. The reaction from the market is expected to be lacklustre on the 20-year paper.
The market is suffering fatigue of longer duration with National Treasury having issued long end papers back-to-back from April 2018.
The CBK came in to the market to mop up excess liquidity and accepted bids worth 10 billion shillings at 5.93 percent.
Despite the money market environment, the secondary market will remain subdued as supply on the medium and short end is limited. The shilling remained flat at 100.7.
The shilling has been resilient this year against the three major global currencies; the US Dollar, the Euro and the Sterling Pound.