Kenya Private Sector Resilience: December 2024 PMI Report
Kenya’s private sector exhibited remarkable resilience against rising inflationary pressures, as revealed by the Stanbic Bank Kenya PMI® report. Businesses demonstrated adaptability and cautious optimism, marking the third consecutive month of improved activity.
Key Insights from the PMI® Report
Purchasing Managers’ Index (PMI™) Trends
- PMI Reading: The index stood at 50.6 in December 2024, slightly down from 50.9 in November but still above the neutral 50.0 threshold.
- Growth Milestone: For the first time since late 2021, the private sector sustained output growth over an entire quarter, driven by increased orders and employment.
Demand and Business Activity
- New Orders: Growth in new orders, attributed to improved customer purchasing power and effective marketing, underpinned the rise in business activity. However, the growth rate slightly eased compared to November.
- Input Purchases: Input buying surged, recording the sharpest expansion since September 2022, with agriculture and manufacturing leading the growth.
Inflationary Pressures
- Input Prices: Input price inflation accelerated, reaching its fastest pace in 11 months. Factors included:
- Currency fluctuations.
- Higher taxes.
- Increased supplier fees.
- Output Prices: Businesses passed rising costs onto consumers, resulting in the sharpest output price increase since December 2023.
- Sectoral Impact: Agriculture and manufacturing experienced the highest inflationary pressures.
Labour Market and Operational Efficiency
- Employment Levels:
- Minimal growth, primarily in the agriculture sector.
- Stagnation or slight declines in other industries.
- Employment index remained above the neutral mark, reflecting cautious hiring.
- Backlogs of Work:
- Reduced for the second time in three months.
- Fastest decline in two years, indicating enhanced efficiency and capacity.
Future Business Sentiment
- Confidence Levels:
- Private sector confidence dropped to the second-lowest level in survey history.
- Only 5% of firms expressed optimism about growth in 2025.
- Expansion Plans: Firms plan new branches, additional services, and enhanced marketing strategies despite concerns over:
- Tax burdens.
- Currency instability.
- Inflation.
Sectoral Highlights
- Construction and Wholesale/Retail:
- Led inventory reduction to minimize waste.
- Agriculture and Manufacturing:
- Strongest growth in purchasing activity, solidifying their role as economic drivers.
Conclusion
Kenya’s private sector has shown impressive resilience amidst mounting inflationary pressures. Strategic cost management, targeted marketing, and adaptive operational practices have enabled businesses to sustain growth and navigate a challenging economic landscape. While challenges persist, the private sector’s adaptability signals cautious optimism for the future.
