Kenya Dec Private Sector PMI at 3-month High of 51.6

The rate of sales growth quickened to a ten-month high and was solid overall.
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Kenya's port of Mombasa in Kenya

Kenya’s purchasing managers’ index (PMI) for private sector activity rose to a 3-month high of 51.6 in December from 50.9 in November 2022.

According to the Stanbic Bank Kenya PMI business activity index, output increased for the second month in a row, owing to higher demand, better weather, and softer price pressures.

A reading above 50 on the index shows expansion, and below it indicates contraction.

Mulalo Madula, an economist at Standard Bank, said the December survey results paint a positive picture for the Kenyan economy, in line with the series average.

“It comes as no surprise to see activity expand, perhaps due to favourable weather conditions and softer price pressures before a challenging 2023,” Madula said.

“Going forward, businesses report only modest positivity, with 89% of respondents anticipating no change in business activity over the next 12 months,” he said.

According to market analysts, this was evidenced by the decline in headline inflation by 0.4% to 9.1% in December 2022, from 9.5% recorded in November 2022.

Additionally, the sales growth rate accelerated to a 10-month high and was solid overall.

“On the positive side, inflationary pressures appear to be easing, with input costs and output prices rising at a slower pace. Moderate inflation is likely to be one of the few positive factors in the second half of 2023,” the PMI reads in part.

On sectoral performances, there were variances, with sectors such as agriculture, manufacturing, wholesale, and retail recording an increase in sales growth while construction and services recorded a decline in sales growth.

“Despite the improvement in the PMI index in December 2022, we maintain a cautious outlook in the short term owing to the elevated inflationary pressures, which have led to a high cost of production,” Analysts at Cytonn Investments posit.

“Consumer demand is also of major concern as prices of commodities remain elevated, thus exerting pressure on consumer wallet. Additionally, following the lapse of the 15.0% electricity subsidy in December 2022, the cost of electricity is set to rise in 2023.”

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