Kenya’s private sector activity grew at a slower rate in December than a month earlier despite festive season’s shopping, findings of a monthly survey indicated on Monday, prompting firms to soften the pace of hiring workers.
That marked the first time private sector activity in December was weaker than November since the onset of the monthly surveys a decade ago.
The Stanbic Kenya Purchasing Managers Index (PMI) —a gauge for monthly private sector activity such as output, new orders and employment— slowed to 50.6 from 50.9 in November.
Reading above 50 signals expansion activity, while that below denotes a contraction.
“The PMI expanded further in December, albeit at a slightly weaker pace than November, reflecting the continued resilience of the private sector following a challenging year,” Christopher Legilisho, chief economist for South African-based Standard Bank, the parent firm of Stanbic Bank, wrote in the December PMI report.
“Positively, this is the first quarter of expansion in output since Q4:21 [fourth quarter of 2021], suggesting that the private sector is showing signs of turning around with new orders and employment also in expansionary territory.”
Kenyan firms have reported monthly growth in key indicators such as output and sales, albeit marginal, since October, pointing to gradual improvement in consumer purchasing power after months of depressed circulation of money in a softening economy.
Households and businesses had earlier in the year also delayed spending decisions for non-essential goods and services on economic uncertainty that followed the deadly anti-government protests largely over higher taxes and corruption.
The PMI report —based on feedback from about 400 panelists drawn from agriculture, manufacturing, construction, wholesale & retail and services— suggests sales in December were boosted by a push by firms in construction and wholesale and retail business to clear stocks.
This came in a month when businesses raised selling prices at the sharpest pace in a year to reflect increased cost of inputs and protect profit margins.
“Kenyan businesses reported increased pass-through of purchase prices, and therefore raised their selling prices in December to protect their profit margins,” Mr Legilisho said. “Rising input and purchase price pressures are attributed to a further increase in demand for commodities and higher taxes, mainly in the agriculture and manufacturing sectors.”
Inflation —a measure of growth in average cost of goods and services over the previous year— increased to 3.0 percent in December from 2.8 percent a month earlier, Kenya National Bureau of Statistics reported.
This was largely on account of higher food, transportation and energy prices inflation.
The food inflation for December was, nonetheless, the highest since September, while transportation cost also rose for the first time in three months despite a drop in fuel prices.
“The Food and Non-Alcoholic Beverages Index increased by 0.7 percent between November 2024 and December 2024. In particular, prices of maize flour-sifted, fortified maize flour and maize flour-loose rose by 7.0, 5.8 and 1.8 per cent, respectively, between November 2024 and December 2024,” Abdulkadir Awes, the KNBS director for population and social statistics wrote in a statement on December 31.
“The Housing, Water, Electricity, Gas and Other Fuels' Index increased by 0.2 per cent between November 2024 and December 2024. The increase was attributable to a rise in price of 50 kWh and 200 kWh of electricity by 0.6 per cent and 0.5 per cent, respectively, between November 2024 and December 2024.”
Majority of firms surveyed in the PMI do not expect to expand businesses in the next 12 months, with a measly five percent planning to raise output through new outlets, products and services.
“With the outlook relatively weak, just the agriculture sector registered a rise in staffing in December. Total employment growth was only fractional,” analysts at Stanbic Bank and American analytics firm, S&P Global, wrote in the PMI report.
“At the same time, businesses offloaded stocks to avoid wastage, leading to the first decline in inventories for five months.”
