Businesses maintain recovery momentum amidst future pessimism: Survey

Businesses maintain recovery momentum amidst  future pessimism: Survey

Conditions for businesses in Kenya’s private sector improved for a fourth straight month in August as the recovery momentum remains unchanged.

This is according to data from the monthly published Purchasing Managers Index (PMI) by Stanbic Bank Kenya which was published on Friday.

The headline PMI reading strengthened to 51.1 points from 50.6 points in July to mirror the improving business conditions.

Firms involved in the PMI survey marked a faster expansion rate last month in contrast with July, dragging with it job creation which strengthened in the period.

The improvements have been largely premised on an acceleration in new orders alongside modest growth in sales.

“An increase in domestic demand was witnessed in most key sectors except manufacturing, while rising orders from clients in the Middle East and Europe boosted overall export demand. Firms were, however, unable to raise their output to meet all the additional demand and consequently, the number of backlogs rose,” noted Stanbic Bank Kenya Fixed Income and Currency Strategist Kuria Kamau.

Firms were however hit by greater purchasing costs following the absorption of new taxes on products including imported goods.

Despite the rebound in business conditions, the majority of business are pessimistic on growth prospects across the next 12 months as they cite ongoing economic instability linked to the COVID-19 pandemic.

The future output index failed to gain further ground during the month and slipped to a near record low for the seven year PMI series.

Kuria however expects the momentum of recovery to hold through the short-run.

“Rising demand coupled with an increase in output should lead to a sustainable recovery in the 12-month outlook reported by businesses which remained close to its historical lows in August,” Kuria added.

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COVID-19 Stanbic PMI Kuria Kamau

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