Private sector activity up from October record low

Tuesday December 5 2017

Workers at a local fertiliser factory. FILE photo | nmg

Workers at a local fertiliser factory. FILE photo | nmg 

By KEVIN MWANZA
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Private sector activity in November recovered from a record low hit in the previous month as the economy bounced back from a period of intense politicking, data from a monthly survey conducted by CfC Stanbic Bank shows.

The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) for manufacturing and services rose for the first time in four months to 42.8 in November from 34.4 in October.

PMI data is usually collected among 400 companies across agriculture, mining, manufacturing, services, construction and retail sectors.

A reading below 50 on the index indicates contraction, while above indicates an expansion.

“Business conditions deteriorated at a slower pace, thanks in large part to the conjecture by the private sector that the political impasse is now behind us,” said Jibran Qureishi, economist for East Africa at Stanbic Bank.

Businesses in the country faced serious headwinds this year from a prolonged electioneering period, coupled with slowing credit growth and a severe drought. These forced many to cut back on spending and lay-off workers to survive.

The situation, however, is showing signs of improvement with the political crisis that brought the country to the brink of violence witnessed in 2007 after a disputed election calming down on President Uhuru Kenyatta’s inauguration.

The Supreme Court had nullified a previous election and ordered a new one that was boycotted by the main opposition presidential candidate.

“A sustained recovery is only likely from January onwards as firms once again start to build inventories and thereafter,” Mr Qureishi said.

“Lower political risk could provide the platform for Kenya’s private sector to stage a recovery over the near to medium term, more so as good weather conditions have improved growth prospects for the agriculture sector and reduced inflation expectations..”

Historical data indicates that Kenya’s PMI has been steadily contracting since April owing to political grandstanding.