Kenya’s private sector activity grew at the fastest pace in 10 months in March on the back of a sharp increase in business inflows, pointing to a strong improvement in economic conditions and cushioning against job losses.
Last month, businesses witnessed improved demand for goods and services, which in turn drove a solid increase in new orders for inputs, despite a modest rise in input prices recorded during the period.
The Stanbic Kenya Purchasing Managers’ Index (PMI) – a measure of monthly private sector activity such as output, new orders and employment – rose to 51.7 last month from 50.6 in February, the highest reading since May last year when it stood at 51.8.
A reading above 50 signals an improvement in business activity, while that below the mark indicates a deterioration.
“Kenyan firms, especially, highlighted a sharper increase in new business inflows in the latest survey. The rate of growth accelerated to its fastest in just over two years,” Stanbic said in the report.
“The uplift in sales supported a faster expansion in business activity across the private sector economy in March. Output increased at the quickest pace since May 2024, with firms generally indicating that they were able to boost activity to match order volumes.”
The survey notes that the manufacturing sector was the only laggard during the month after recording fresh contractions in production and new orders.
The overall positive performance, however, failed to trigger hiring, which remained subdued during the period as business leaders remained cautious about future business activity.
“The March Kenya PMI shows a private sector with faster growth in output and new orders, assisted by increased customers, good weather and sustained marketing,” said Christopher Legilisho, chief economist at South African-based Standard Bank, Stanbic’s parent firm, in the March PMI report.
“However, the upturn was not broad-based, with some firms and certain sectors feeling the downside of weaker consumer demand.”
In recent months, businesses and households have struggled with biting shortage of money in circulation in an economic environment where the banking sector cut lending to the private sector amid high interest rates offered on government securities.
The Central Bank of Kenya (CBK) has, however, moved to rein in the lenders to lower their rates after cutting the benchmark rate four times by 2.25 percentage points to 10.75 percent between August 6 last year and February 5 this year.
The rise in new business orders in March therefore signals a recovery in money circulating in the economy, which will further boost sales in the coming months.
Businesses reported that the average time taken for inputs to arrive had shortened, reflecting an improved commodity supply and better timeliness of payments to vendors.
They were also able to stockpile more inputs as a result of higher sales volumes.
