Kenyan private sector firms have recorded an improvement in operating conditions in December according to survey data from the Stanbic Bank Purchasing Managers’ Index (PMI).
The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) for manufacturing and services rose to 53.3 in December from 53.2 in November. Readings above 50 indicate growth.
“The latest PMI survey signaled a solid improvement in the Kenyan private sector economy, despite some headwinds at the end of the year. Sales growth remained sharp, but output increased only slightly as heavy rains delayed activity and input deliveries. Suppliers thus raised prices at a faster pace, while cost-cutting measures meant that job numbers grew at the weakest rate in seven months,” the survey report said.
Posting at 53.3 in December, the headline PMI indicated a solid improvement in business conditions and one that was stronger than the average for 2019 (52.6).
However, Kenyan businesses were concerned about cash flow problems, from delayed government payments.
“Output growth was marginal overall, as a number of panelists commented on cash flow problems and poor weather conditions. In particular, heavy rains made some roads inaccessible, leading to the first slowdown in delivery times for nearly five years.”
“Private sector arrears should be the main priority for the government in order to alleviate severe cash flow shortages which firms are grappling with,” Jibran Qureishi, regional economist for East Africa at Stanbic, said.
For now, government payments amid a slow recovery in private sector lending may keep overnight rates in single digits.
Treasury has so far this fiscal year paid out Ksh 10.23 billion of the Ksh 15 billion cleared bills.
“However, this may not be sufficient to keep markets liquid in view of the aforementioned borrowing needs, unless government’s budget efficiency improves markedly,” says Faith Atiti and Stephanie Kimani, from the NCBA Research Team.
The performance was dampened across the board with Agriculture and Industrial sectors posting a sluggish growth of 3.2% and 4.5% (vs trend of 4.6% and 5.4%, respectively).