Kenya's private sector showed signs of recovery in July, breaking a four-month streak of contraction according to the latest Purchasing Managers’ Index (PMI) released by Stanbic Bank.
The headline PMI rose to 51.3 in July from 50.0 in June, indicating an improvement in business conditions. A reading above 50 signals expansion, while below 50 denotes contraction.
Drivers of Growth
- Increased marketing activities and customer referrals boosted sales volumes.
- New work inflows expanded solidly for the second consecutive month, accelerating to the fastest pace since January.
- Private sector employment grew notably, mainly through short-term hiring to manage rising workloads.
Challenges Persist
- Despite stronger demand, output contracted for the fifth consecutive month, though at a slower rate.
- Inflationary pressures and liquidity constraints limited firms’ ability to fully capitalize on demand.
- Input costs remained elevated, driven by rising transportation expenses, fuel prices, and material shortages linked to the Middle East conflict.
- Supplier performance declined for the second month, causing delays in deliveries and mixed inventory strategies among businesses.
Market Sentiment and Outlook
Despite ongoing challenges, business sentiment improved to the highest level in nearly three and a half years. Optimism was supported by expectations of increased demand, diversification efforts, innovation, and supply chain improvements.
While selling price inflation slowed to its lowest since April, only 15% of firms raised prices, reflecting concerns over maintaining profit margins in a price-sensitive environment.
