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Kenya’s private sector business conditions stabilize in April as price pressures mostly ease: PMI

Kenya's private sector 12-month outlook rebounds as business confidence strengthens
Kenya’s private sector business conditions stabilize in April as price pressures mostly ease: PMI
Kenya's companies continued to expand their workforce for the fourth consecutive month in April

Business conditions in Kenya’s private sector remained largely stable in April as order book volumes and output levels were little changed since March. The 12-month outlook continued to rebound sharply from February’s record low, and employment growth continued to increase. Average input prices fell for the first time in almost four years, driven by a record monthly decline in purchasing costs.

The headline S&P Global Stanbic Bank Kenya Purchasing Managers’ Index (PMI) registered above the 50.0 threshold at 50.1 in April, up from 49.7 in March. This stability falls in line with the trend in 2024 so far, where the PMI has averaged at 50.2.

New business remains resilient

Despite global economic uncertainties, the volume of new business Kenya’s private sector companies received in April remained relatively stable. This trend marks a significant improvement compared to the challenges the country faced in 2023, where new orders fell on numerous occasions.

Similarly, total private sector output remained close to the neutral threshold and the third-highest since January 2023, reflecting resilience in the face of economic headwinds. However, outstanding business increased slightly for the third time in four months.

Business sentiment rebounds

A notable highlight of the April PMI report was the rebound in Kenya’s private sector 12-month outlook. Confidence among businesses regarding future output strengthened significantly from February’s record low. This optimism, the highest since March 2023, was fueled by planned investments in marketing, capacity upgrades, new branches, recruitment, and expansion into other African markets. Service providers, in particular, expressed robust growth forecasts.

Sustainable employment growth

Against this backdrop of improved confidence, Kenya’s companies continued to expand their workforce for the fourth consecutive month in April. Although the rate of job creation increased slightly from March, it still remained below the survey trend. Nevertheless, this employment growth reflects growing optimism and signals a positive trajectory for the labor market.

Read: U.K. public sector productivity declines 2.3 percent in Q4 2023

Falling input costs and price pressures

April’s PMI data revealed weaker price pressures in Kenya’s private sector, driven by falling input costs. Average input prices fell for the first time in nearly four years, with the wholesale and retail sector experiencing the largest decline. However, the only sectors to witness an increase in input costs were the agriculture and construction sectors. Purchase prices also fell, marking only the second time in the survey’s history and at a record rate. Despite this decline, wages rose at the fastest rate in eight months, albeit at a modest rate.

While Kenya’s firms increased their purchases of inputs in April, the rate of expansion remained modest. This trend mirrored the lack of significant growth in new work during the month. Additionally, suppliers’ delivery times continued to decrease on average, as vendors competed for business. However, reports of flooding causing delays underscored ongoing challenges in the supply chain. Despite those challenges, firms were able to expand their inventories for the third consecutive month.

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