Kenyan Firms Show Improvement in Business Conditions in Q4 2024

Kenyan firms experienced a notable improvement in business conditions midway through the final quarter of 2024, according to the latest Stanbic Bank Purchasing Managers’ Index (PMI) report for November. The report highlights that sales grew at the fastest pace since May, leading to a moderate increase in output and stronger purchasing activity.

The PMI indicated a sustained expansion in the Kenyan private sector, posting a score of 50.9 in November, up from 50.4 in October. This marks the highest rate of growth in six months, albeit marginal.

Christopher Legilisho, an Economist at Standard Bank, commented on the data, stating that the Stanbic Bank Kenya PMI report reveals a private sector increasingly optimistic about current economic conditions. The PMI rise to 50.9 signifies an expansion in business conditions for the second consecutive month, driven by improved output and new orders amidst stable employment.

“New orders grew at the fastest pace in six months, with improvements in consumer spending and increased travel contributing to higher sales. However, this growth was primarily observed in the wholesale, retail, and services sectors, while sales declined across agriculture, manufacturing, and construction,” said Legilisho.

Employment levels remained in expansion for the second consecutive month, though job growth was slower compared to October. Hiring was attributed to increased workloads, more generous marketing budgets, and improved orders.

Legilisho noted that higher sales supported increased purchasing activity, which grew at the fastest pace in over two years, with inventories being boosted to cater to strong demand. “With positive economic momentum, input and output cost pressures increased due to higher taxes and increased outlays by firms to support higher sales volumes. Despite the notable improvement in current conditions in November, firms remain cautious about the outlook,” he said.

Business expectations remained relatively weak and softened slightly since the start of the fourth quarter. Only 8% of firms expect activity to rise over the next 12 months, with positivity linked to new marketing initiatives, digital technologies, and branch openings.

The report also indicated that accelerated growth momentum contributed to higher price pressures, with input costs rising solidly from October. Consequently, selling prices increased to the greatest extent in nine months.

“Companies in the survey panel often highlighted an improvement in customer spending and increased travel driving sales higher. The upturn was concentrated in the services and wholesale and retail segments; however, agriculture, manufacturing, and construction recorded declines in new orders,” the report stated.

Despite these mixed results, the overall rise in sales, which was the best in six months, led to an expansion in private sector activity in November. The rate of output growth picked up from October and climbed above the series average. Higher output requirements supported a solid uplift in purchasing activity, the fastest observed since September 2022.