In May 2024, the Purchasing Managers’ Index (PMI) increased to 51.8 from 50.1 in April, indicating better business conditions.
Costs decreased, and new business grew, leading to increased activity. Input prices dropped due to lower fuel and import costs on favorable exchange rates while selling prices began to rise slowly.
Improved private sector conditions resulted from reduced inflationary pressures, leading to higher output and new order inflows. However, output decreased in agriculture and construction due to heavy rainfall and floods.
Purchasing activity and inventories rose, as firms hired more workers. Job creation continued for a fifth consecutive month amidst larger workloads and prospects of new business. However, wage pressures remained prevalent as firms continued to hire in anticipation of improved demand.
Average prices charged by private sector firms slightly increased in May, driven by efforts to enhance margins and pass on cost reductions to clients.
Output and new orders saw significant increases in May as firms reported heightened consumer demand. Firms also procured larger quantities, thus raising their inventory levels and strengthening their buffers.
Kenyan firms increased their purchasing activity at a quicker rate in May amid rising sales and output requirements. The rate of purchasing growth was the fastest for 20 months and contributed to a stronger uplift in inventories.
Additionally, firms hired more workers for the fifth month running. After falling for the first time in over three years in April, average prices charged by private sector firms rose slightly in May.
The increase in prices was broadly related to efforts to improve margins, though there were many reports of firms passing on cost reductions to clients.
Kenyan businesses remained more confident about future activity than at the start of the year, despite the degree of confidence slipping from April’s 13-month high. Growth projections partly reflected plans to open branches, purchase new vehicles and boost marketing spending.
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