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Kenya experienced a surge in private sector business in February, fueled by lower inflation that spurred new orders hence driving up the benchmark index to 51.3 from 49.8 in January, the latest Stanbic Bank Kenya’s Purchasing Managers Index (PMI) survey has revealed.

The survey’s readings above 50 indicate an improvement in business conditions compared to the previous month, while readings below 50 signal a deterioration of activities.

The headline index rose for the third consecutive month in February, taking it above the 50 neutral threshold for the first time since last August.

However, according to Christopher Legilisho, an Economist at Standard Bank, escalating prices hindered cash flow and spending, subtly affecting total sales during the survey period.

Kenya experienced a dip in the annual inflation rate to post 6.3 per cent from 6.9 per cent, marking the lowest rating since March 2022, even as this rate falls within the Central Bank’s target range of between 2.5 per cent to 7.5 per cent.

“At 51.3, up from 49.8 in January, the index was also at its highest level in just over a year, with positive directional influences seen in all five of its sub-components,” Lengilisho said. The upturn in business activities saw improved client demand through new product releases, and better stock levels leading to the fastest sales increase since January 2023, spiking production to a 13-month high. There was also a moderate expansion in employment levels, with firms hiring more to meet increased workloads.

Further, a decline in input purchases was reversed after five months, which according to the survey paints a picture of a resilient and growing private sector.

Lower fuel prices helped to ease input cost inflation to a 26-month low, supporting the softest increase in output prices for one-and-a-half years. “The slowdown allowed firms to raise their selling charges to a softer degree. Charge hikes eased to the weakest recorded for a year-and-a-half…Nevertheless, rising prices continued to restrict cash flow and spending power, which meant that total sales growth was only marginal,” Legilisho said.

This, coupled with improving economic conditions, led companies to expand staffing levels and boost input purchases.

However, the sector faced challenges. Rising prices continued to restrict cash flow and spending power, leading to only marginal growth in total sales.

The construction, wholesale and retail sectors witnessed the sharpest sales declines. Despite these hurdles, employment levels rose due to higher new order intakes, with firms hiring casual workers to meet workloads.

“Staff increases were modest, but the fastest since last August. Purchases of inputs also expanded, ending a five-month run of decline, whereas improvements in supplier performance broadly stalled,” Legilisho said.