Kenya: Business Conditions Improve for the First Time in Eight Months Following Prolonged Presidential Election

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Business conditions in Kenya improved for the first time in eight months amid reports of greater political stability, researchers from Standard Bank Group – Africa’s largest lender by assets – have confirmed.

In their latest report, released on January 4th, 2017, market analysts from Stanbic Bank Kenya, a member of the Standard Bank Group, noted that growth was underpinned by expansions in output, new orders, stocks of purchases and employment, thereby reversing the recent downward trend.

“On the price front, firms continued to face intense cost inflationary pressures,” they said.

Subsequently, firms raised their average selling prices which they linked to the pass-through of higher cost burdens to clients.

The headline figure derived from the survey is the Purchasing Managers’ Index (PMI). The Stanbic Bank Kenya Purchasing Managers’ Index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in approximately 400 private sector companies, which have been carefully selected to accurately represent the true structure of the Kenyan economy, including agriculture, mining, manufacturing, services, construction and retail.

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

Rising to 53.0 in December from 42.8 in November, the East African country’s latest PMI reading signalled that the Kenyan private sector economy returned to expansion territory.

The reading was consistent with a solid improvement in the overall health of the sector, and one that was the strongest since December 2016.

Commenting on December survey findings, Jibran Qureishi, Regional Economist for East Africa at Stanbic Bank said that the Stanbic PMI rose above the 50.0 level mark for the first time since April as the private sector began to benefit from political stability.

Kenya held its General Election on August 8th, 2017, though results from the Presidential race were disputed, leading to a re-election in October. The prolonged polls were said to wreak havoc on the country’s economic growth.

“Looking ahead, we remain optimistic that growth will recover over the coming year supported by the agriculture and tourism sector, while a resumption in public spending will also add some much-needed stimulus,” he explained.

The upward movement in the headline index was supported by a rise in business activity for the first time in eight months during December. Furthermore, the rate of expansion was the fastest since September 2016 and sharp overall.

Panellists reported that reduced political tensions and improved customer demand were the key factors behind greater output.New business at Kenyan private sector companies rose for the first time in five months during December. Furthermore, the rate of growth was the strongest in nearly a year.

There were reports that a less heated political climate led to a greater customer turnout.

Mirroring the trend for new orders, new export orders rose for the first time in five months amid reports of greater international demand for Kenyan products.

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