Private sector activity hits 13-month high, signals more jobs

The private sector reported expanded economic activity last month to touch a 13-month high, signalling hopes of more job prospects and improved tax revenue.

The latest Purchasing Managers Index (PMI) by HIS Markit and Stanbic Bank Kenya, which tracks private-sector activity, shows business activity jumped to 54.1 in September from 52.9 in August on the back of the an improvement in operating conditions.

“Private sector activity is showing signs of momentum, although panellists continue to highlight cash flow issues that they face,” said Stanbic Bank East Africa regional economist Jibran Qureishi.

“In addition to the current stock of arrears owed to the private sector, the interest rate capping law could also hold back firms from flourishing on a multi month basis.”

Readings above 50 in the index signal an improvement in business conditions, while those below 50 show a deterioration.

Companies surveyed reported growth in production, new orders, stocks of purchases and employment, the latter showing its highest trend since December 2016.

“Job numbers grew solidly over the course of the month, with latest data signalling the joint-quickest rise in employment since December 2016. Contributing to the uptick was an even sharper increase in new business in September,” said Stanbic and IHS.

A rebound in private sector activity will give some relief to the Kenya Revenue Authority (KRA), which has struggled to meet revenue targets due to a softer economy.

Kenya’s economy grew by 5.6 percent in the second quarter of this year, down from an expanding 6.4 percent in the same period a year earlier, the Kenya National Bureau of Statistics (KNBS) said, adding that manufacturing and transport sectors decelerated.

Delayed rainfall in the second quarter to June affected the key farming sector, which accounts for close to a third of economic output, and this, in turn, slowed down economic growth.

In recent months, the slow growth of the economy has seen companies freeze hiring and pay increases while some have had to shed jobs.