Private Growth Eases To Ten-Month Low as PMI Falls To 52.7% In September

The Purchasing Manager’s Index (PMI) for the month of September stood at 52.7, down from 54.6 in August according to the latest report released by Stanbic Bank Kenya.

According to the lender, the latest figure indicated an improvement in business conditions across the private sector in September; the tenth month in a row that this has been the case.

However, the rate of growth was the slowest in the aforementioned sequence. Furthermore, being only modest overall, the expansion was weaker than the historical average.

Continuing the sequence of growth seen since December last 2017, output improved once again in the Kenyan private sector during September.

Some firms linked rising output to higher inflows of new business. That said, the rate of growth was the slowest in ten months during the latest survey period.

Partly reflecting higher operating costs faced by businesses in the private sector, selling prices were raised at a marked pace that was the fastest since February 2014 during September. Output charges have risen for ten straight months.

Backlogs of work increased for the second month in a row, linked to slower activity growth. The rate of expansion was solid overall, however. Meanwhile, inventories increased during September, linked to higher purchasing activity.

The Stanbic PMI averaged 55.6 in the second quarter of 2018 up from 54.4 in the first quarter. The improvement in business conditions in the second quarter was consistent with the official GDP growth rate which expanded by 6.3 percent in Q2 up from 5.7 percent in Q1

Cost pressures and enhanced business uncertainty due to new fiscal year tax measures in the third quarter is likely to moderate the pace of GDP growth.

Nevertheless, we have opted to revise our 2018 GDP growth estimate upwards to 5.8 percent y/y from 5.6 percent y/y previously owing to a solid performance from the agriculture, ICT and tourism sectors in the first half of the year.