Kenya posts growth but at lower pace

Kenya’s economy has expanded for the third month running but the growth has notably been at a slower pace than that of a comparable period last year.

According to CfC Stanbic Bank Purchasing Managers’ Index (PMI), there was an increase in employment, with job creation hitting a three-month high.

CfC says employment creation continued to improve as work backlogs increased for the seventh straight month.

Labour is also attracting more remuneration as firms compete to lure the best brains, which has in turn pushed up costs in terms of salaries.

“Costs for firms have also been on an upward trend over the past couple of months despite the stable exchange rate, as attracting labour has become more competitive forcing firms to outbid each other,” the regional economist for East Africa at CfC Stanbic Bank, Jibran Qureishi, said.

Mr Qureishi sees the situation improving going forward, saying Central Bank of Kenya’s decision to lower the signalling rate for lending institutions will be instrumental in spurring growth.

“Conditions within the Kenyan private sector continued to improve, however, at a slower pace. Judging by historical standards, the PMI has expanded much more softly than previous quarters. The recent easing of the monetary policy stance is thus a good move in order to kick-start economic activity,” Mr Qureishi added.

The survey that polls 400 private sector companies also showed that the firms placed new orders in May although the rate of expansion was slower than their respective trends.

Firms also raised their input buying at the quickest rate in three months as they sought to keep pace with private sector expansion.

Growth of total new work was mainly supported by exports, which increased for the sixth straight month, notably, with a number of firms in particular making reference to trade with Uganda.

The report indicates that new client contracts and incoming projects had led firms to raise their output.  

The composite index, at the same time, indicated an increase in costs to the business both in workers’ pay and in accumulating of new inventories.

“Growth of purchasing activity was sustained at a marked pace similar to that seen in April. New business gains were reportedly behind the rise. As a result, the rate of pre-production inventory building remained strong, with the latest expansion the quickest since February,” Mr Qureishi said.

Cost pressures increased for the second successive month in May. But the latest rise was weaker than the average over nearly two-and-a-half years of data collection.