Kenyan businesses reported another improvement in operating conditions in February, continuing the growth streak that began in late-2024, as survey evidence signaled that a greater stabilization of the wider economy drove higher demand and output.
Lower inflationary pressures also supported the upturn, as both input and output prices rose at the slowest rates for four months. Nevertheless, the growth signal derived from the latest survey was relatively mild in February, particularly as several businesses continued to report challenges boosting sales.
Employment and inventories also rose only slightly, in line with a subdued outlook for year-ahead activity. The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI®).
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration. At 50.6 in February, up from 50.5 in January, the headline PMI was consistent with a strengthening of business conditions for the fifth month running.
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However, the reading was below its long-run average of 51.2 and signaled only a marginal overall improvement. Business activity grew for the fifth straight month and at the quickest pace since November last year.
Reports from surveyed firms signaled that a general uplift in the economic environment had strengthened demand and led to an increase in output. Several firms also reported expanding their product offerings and investing more in marketing.
The volume of new orders also rose for the fifth month in succession, with improving cash flow, softer price pressures and new products and services encouraging an increase in demand. However, many firms reported challenges in boosting sales, resulting in an overall rate of new business growth that was only slight.
Sector divergences were apparent in February, with output and new business growth driven by agriculture, manufacturing and construction. Meanwhile, wholesale & retail and services firms recorded declines in activity, new work and purchases of inputs.
February data indicated a further softening of input cost inflation across the private sector. Average input prices rose at the slowest pace in four months, due to a weaker increase in purchase prices.
Firms responded with a softer markup of their charges. Business sentiment for the coming year dropped to one of its lowest points on record in February. Notably, only 5 percent of surveyed firms anticipated an upturn amid ongoing concerns about the wider economy and high competition.
Subsequently, firms made only limited improvements to staffing and inventories. Although employment growth recovered to a four-month high, it was weaker than its long-run trend. Similarly, the uplift in stocks was below-average, as purchasing activity fell for the first time since July 2024.
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