Kenya's private sector expands at slower pace in September

Kenya’s private sector activity expanded at a slower pace in September due to cost pressures and uncertainty over new tax measures as per the Markit Stanbic Bank Kenya Purchasing Managers’ Index(PMI).

The manufacturing and services fell to 52.7 in September from 54.6 in August.

“On the inflation front, higher government taxation and rising fuel bills underpinned the sharpest increase in average cost burdens recorded for seven months during September. The rate of input price inflation was sharp overall,” the survey found.

Jibran Qureishi, Regional Economist E.A at Stanbic Bank noted that index averaged 55.6 in the second quarter of 2018 up from 54.4 in the first quarter consistent with the official GDP growth rate which expanded by 6.3% y/y in Q2 up from 5.7% in Q1.

“However, 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,” Qureishi said in a statement.

In the survey, the output for companies increased during the month from a section of the respondents reported increased orders in new business “thereby extending the current phase of growth to ten months. Despite the rate of growth being marked overall, it was, in fact, the slowest recorded since January.”

As a result, Stanbic Bank has opted to revise its 2018 GDP growth estimate upwards to 5.8% y/y from 5.6% y/y previously owing to a solid performance from the agriculture, ICT and tourism sectors in the first half of the year.