CfC Stanbic Bank Launches Kenyan Private Sector Based Index

Kenyan private sector output has increased at a faster rate in February, mirroring an overall improvement in business conditions

CfC Stanbic Bank in conjunction with a leading financial information services provider – Markit – has launched a monthly survey of business conditions in the Kenyan private sector.

The headline figure derived from the survey will be known as the Purchasing Managers’ Index™(PMI™) and the survey, which started in January 2014, provides an early indication of business conditions in the country.

It is a composite index, calculated as a weighted average of five individual sub-components: New Orders (30 percent), Output (25 percent), Employment (20 percent), Suppliers’ Delivery Times (15 percent) and Stocks of Purchases (10 percent).

The Index is premised on providing the earliest, most accurate and most comprehensive suite of economic indicators in the country and helps provide policy makers and businesses make well informed decisions.

Equally, the key indicators will provide a solid basis for investment strategies and asset allocation. The latest figures (February 2015), show that the Kenyan private sector output increased at a faster rate in February, mirroring the overall improvement in business conditions.

Commenting on the February figures, Jibran Qureishi, Economist at CfC Stanbic Bank said: “The PMI index recovered in February after a slower pace of growth recorded last month, primarily driven by rises in output and new orders. Interestingly, the PMI seems to have lost the solid momentum witnessed towards the end of last year, although we suspect this is transitory.”

He added: “The decline in international oil prices and power tariffs as a result of the geothermal component being added to the national grid should lower costs for most firms in Kenya and will probably lead to higher output in the coming months. Confidence within the Kenyan private sector remains high and should continue to bode well for business conditions.”

The rate of expansion was marked overall, helped by a healthy customer turnout. Likewise, growth of new export business picked up since January. In fact, the latest increase was the most marked in 14 months of data collection.

Companies continued to hire staff in response to increased production requirements in February. The rate of job creation accelerated in line with output and new orders, having eased to the weakest in the survey’s history at the start of 2015.

Sharper expansions in output and new work intakes also led to ongoing growth of purchasing activity during February. Input buying rose at a faster pace, contrasting with the weakest increase in pre-production inventories since the survey began in January 2014.

A by-product of higher new work inflows was a return to growth for backlogs of work. However, the level of outstanding business rose only fractionally during the month.

The February data signalled that the overall increase was driven by modest rises in both purchase prices and staff costs during the month. Subsequently, prices charged by Kenyan private sector firms rose in the month under review, albeit at a historically muted pace.