Kenya’s private sector saw its health improve in September, marked by stronger rate of new business growth, improved market demand, customer referrals, marketing campaigns and cash injections.

According to the Stanbic Bank Kenya PMI readings, the index rose to 51.3 in September from 49.9 in August, signalling a modest improvement in business activity.

Kenyan Businesses also reported fresh increases in purchases and inventories, alongside continued payroll growth. However, inflation remained elevated, with both overall input costs and output prices rising at faster rates than in August.

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 deterioration.

New orders have risen in every month since June. In spite of the overall improvement in demand conditions, business activity contracted for the seventh month running, although the rate of decline was the softest in the current sequence and only slight.

Kenyan firms worry about inflationary pressure

Kenyan Firms once again signalled that inflationary pressures had dampened output, while some also reported cutbacks linked to shortages of agricultural goods. Other companies, however, were encouraged by improving sales and recovering cash flows.

Kenyan firms also reported a renewed expansion in purchasing activity in September, following a four-month sequence of contraction. Although slight overall, the rise supported an increase in input inventories for the first time since June.

Suppliers’ delivery times improved for the second month running in September, though only slightly, with survey comments suggesting that material shortages had once again limited the extent of the improvement.

September data revealed a further rise in employment at Kenyan companies.

Commenting on the survey findings, Christopher Legilisho, Economist at Stanbic Bank said:

“The rise in Stanbic Kenya’s headline PMI in September points to a demand-led improvement in private sector conditions rather than a broad-based recovery in activity.

New orders increased for a fourth consecutive month, supported by robust customer demand and improved cash flows, yet output contracted for a seventh straight month as higher fuel, transport and agricultural input costs, alongside material shortages, limited firms’ ability to convert sales into production.

“Manufacturing, construction and services expanded, while agriculture, wholesale and retail remained under pressure. Continued hiring, rising backlogs and renewed inventory accumulation indicate that firms expect demand to persist, but also suggest that capacity and supply constraints are becoming more binding.

Moreover, the acceleration in output price inflation to its second-fastest pace since November 2023 implies that businesses are increasingly passing higher costs to consumers. The near-term outlook is therefore cautiously positive with demand momentum supportive of activity, but a sustained expansion will require an easing of cost pressures and improved input availability; otherwise, growth may remain modest and increasingly inflationary.”