The headline Purchasing Managers Index (PMI) rose from 56.3 in September to 59.1 in October, signaling the sharpest improvement in business conditions since the survey began in January 2014 according to a report released by Stanbic Bank.
According to the lender Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
Output and new order growth accelerated to the sharpest on record in October as lockdown restrictions, associated with the coronavirus disease 2019 (COVID-19), eased.
Robust increases in output requirements led to a solid expansion in purchasing activity. At the same time, strong demand for raw materials and higher staff costs led to an overall rise in average cost burdens.
Kenyan firms raised their input buying during October, with the rate of expansion the sharpest in the series so far. Re-production inventories rose markedly. Stocks increased in tandem with favorable predictions for future demand.
Purchase costs faced by Kenyan private sector firms rose solidly, which firms linked to higher raw material prices. Staff cost inflation was recorded, albeit marginal. Selling prices also increased with panel members reportedly passing higher cost burdens on to customers.
Output rose for the fourth successive month at the start of the final quarter, accelerating to the sharpest pace since January 2014.
New business placed at Kenyan private sector firms increased in October, thereby stretching the period of expansion to four months. The rate of growth accelerated for the second month running and was the sharpest since the start of the survey almost seven years ago.
“Exactly 35 percent of respondents reported a rise in new work inflows. Anecdotal evidence suggested increased cash flow led to improvements in demand conditions,” said Stanbic Bank in their report.
New export orders continued to grow in October, as has been the case since June. The latest upturn accelerated from September and was among the fastest in the survey’s history. Greater demand in European countries was often linked by panel members to the latest rise.
“Business confidence has been on the rise over the last couple of months, courtesy of easing domestic containment measures which have boosted demand, albeit from a low base from April/May. That being said, with lockdowns being reimposed in some major international trading partners, new orders could ease over the coming months especially if external demand falters. Moreover, with Covid-19 cases also on the rise nationally, the risk of further containment measures poses downside risks to economic activity, prompting us to be cautious,” Jibran Qureishi, Head of Africa Research at Stanbic Bank said.