Kenya’s Services Improve in August, but Still in Contraction

The headline Purchasing Managers’ Index (PMI) for the month of May 2021 increased to 52.5 from the 41.5 recorded in April 2021, attributable to the lifting of the partial restrictions that had been imposed in March 2021.

Workers at the Kitui County Textile Centre producing surgical face masks PHOTO Charity. Apr 8, 2020

Kenya’s services activity continued to pick up pace in August with output and new orders rising solidly, but continued to contract as firms reported job losses, according to a private survey.

“Sentiment improved for the first time since February, but remained relatively weak,” the IHS Markit Services PMI said on Thursday recording a second straight month of growth in the Kenyan private sector, with output and new orders rising as the economy gradually opens up.

The Purchasing Managers Index (PMI) fell to 53 in August 2020 from 54.2 in July. 

Despite falling from 54.2 in July, the index suggested that the rate of growth remained solid overall according to the index.

While exports volumes grew at a record rate, employment figures fell amid efforts to cut wage costs. Although business sentiments improved for the first time since February 2020, they are still relatively weak.

“The employment index still remains below the 50 level, largely reflecting firms scaling back on wage costs,” said Jibran Qureishi, Head of Africa Research, Stanbic Bank.

“Weaker jobs growth indicates the underlying challenges the road ahead presents, even as business confidence has improved over the past two months.”

During the period, Kenyan firms continued to record an upsurge in new orders, for the second month since lockdowns were lifted in Nairobi and Mombasa, in response to renewed demand from consumers.

According to the quarterly labour report by the Kenya National Bureau of Statistics (KNBS) the number of unemployed citizens has grown by 58.6 percent to 1.8 million Kenyans from 961,666 in the first quarter.