Employment surge signals resurgence, Purchasing Manager Index report indicates
By Steve Umidha, January 6, 2022Kenya’s private sector is upbeat with a surge in employment and purchasing power signalling government stimulus policies and pandemic mitigation strategies managed to cushion the economy going into 2022.
This after private sector activities picked up to a 14-month high in December last year as demand for commodities and services improved, says the Purchasing Manager Index (PMI) report released by Stanbic Bank yesterday.
“Both domestic and export demand expanded rapidly on account of fewer public health restrictions locally and around the world.
Export firms particularly noted increased demand from Europe and parts of Africa,” noted Kuria Kamau, Fixed Income and Currency Strategist at Stanbic Bank.
Purchasing power
Overall sales volumes rose at the fastest pace since October 2020, driving further uplifts in purchasing, inventories and employment.
“To manage higher workloads, companies also raised their staff levels, though the pace of job creation was only modest and softer than November’s two-year high,” the PMI report said.
The period in review coincided with the government easing lockdown restrictions during the third quarter of the year as firms saw a release of pent-up demand as clients largely returned to markets.
Analysts however caution of weakening business confidence seen at the end of the month under review, with many businesses cautious on whether there will be much improvement this year.
While there were hopes of expanding premises and offering new products and services in 2022, optimism fell as COVID-19 cases rose to a record level, according to the report.
“The Future Output Index fell to a survey-record low in December, indicating that business sentiment was at its lowest level for at least eight years. The majority of respondents instead gave a neutral outlook for 2022,” reads the survey findings.
This after a sharp increase in input costs across the private sector, though the rate of inflation eased slightly to a three-month low.
During the month under review, the PMI rose for the third straight month to 53.7 in December from 53.0 in the previous month – with the reading being the highest recorded in 14 months, pointing to a solid improvement in the health of the private sector economy.
Readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show a deterioration.
Pace of growth
The pace of growth was the strongest seen since October 2020, as panelists commented on improving customer demand and better cash flow as economic conditions recovered further from pandemic measures. Subsequently, output levels rose sharply and at the fastest rate since the beginning of 2021.
Kenyan companies rose sharply midway through the final quarter of the year, with the rate of growth accelerating for a second straight month to the quickest since May, with firms reporting higher sales on an increase in customer numbers that was often linked to the removal of curfew hours.
As a result, Kenyan firms saw a further strengthening of output and new business growth at the end of the year, says the latest PMI data, which also noted an overall rise in the cost of doing business. The study blamed this on higher purchasing prices.