Kenyan Firms Record Solid Rise in New Business During the Month of May

Kenyan firms saw a solid rise in new business and a renewed improvement in operating conditions during the month of May for the first time since November 2018. This, after recording a deterioration in April, according to Stanbic Bank’s Monthly Purchasing Managers’ Index (PMI).

The headline PMI reading rose to 51.3 from 49.3 recorded in April to signal an improvement in the health of the Kenyan private sector.

According to Cytonn Investments, readings above 50.0 signal an improvement in business conditions, while readings below 50.0 show a deterioration.

In the private sector, new orders grew with several businesses reporting that they had acquired new clients including some international ones.

Consequently, output levels expanded but the gain was marginal and weaker compared to the last sequence of growth that ended in March.

This was as a result of cash flow problems in the economy, but many businesses remained resilient and raised activity in line with the increased demand. Notably, many firms held back on purchases with the rise in input prices.

The higher demand levels contributed to modest growth in employment among Kenyan businesses in terms of increased marketing roles.

Firms were, however, unable to keep up with the new orders and backlogs grew at the fastest rate since September.

Going forward, analysts from Cytonn Investments note that the risk of high input prices remains abundant due to the continued rising fuel prices coupled with the effects of delayed onset of long rains this year.

Should the government clear the arrears it owes its suppliers as recently directed by President Uhuru, a pick up in the sector can be expected due to improved cash flows which have continued to be a major problem in recent months.

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