For the first time in four months, Kenya experienced improved business conditions according to The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) for the month ending December 31, 2023.
PMI consists of a diffusion index that summarises whether Kenyan market conditions are improving, staying the same or contracting.
While the private sector declined in December 2023, it was the first time in a month that business contracted at a slower pace.
The Stanbic PMI rose to 48.8 in December, which was three points higher than in November.
A photo of a trader selling shoes at Nairobi’s Central Business District (CBD).
A ranking below 50 indicates that businesses in the country are contracting, especially in the private sector.
The downward slump was tamed by easing inflation and the service sector experiencing improved business conditions.
“According to anecdotal evidence, customer turnout and purchasing power improved amid a softening in inflationary pressures, especially across the services sector,” the PMI noted.
However, the Stanbic Bank Kenya Purchasing Managers’ Index (PMI) showed a depreciating shilling, and the effects of President William Ruto’s hiked taxes were heaping pressure on input costs.
“Firms indicated that input costs and purchase cost pressures were primarily due to higher taxes among other factors. There was a notable reprieve from fuel and transport costs that moderated during the month. Still, business expectations for the year ahead remain quite weak based on the survey results from respondents,” an excerpt of the report reads.
The report was made on the same month that Kenya was ranked third globally in foreign direct investments for 2024.
In a December report by Foreign Direct Investment (FDI’s) annual Standout Watchlist, Kenya is expected to carry the strongest investment momentum into 2024 with an index score of 87.44 after Cambodia and the Philipines.
In his address to the nation on New Year’s Eve, President William Ruto remarked that Kenya’s performance at the meta-governance level was an indication the country was heading toward economic stability.
Despite the positives, the Stanbic PMI noted that Kenya was not out of the woods yet.
“Contractions in output and new orders remained sharp in the manufacturing and construction sectors, as firms continued to signal cost-of-living pressures and weak demand conditions,” the report indicated.
The weakening of the shilling against major currencies, as well as an unfavourable tax regime, were fingered to be key factors in pressuring input costs.
A photo of one hundred shilling notes