Private companies increased their hiring for the fifth successive month in May as business activity continued to experience strong growth, the Stanbic Bank Kenya PMI says.

A steady dip in fuel prices and import costs owing to the strengthening of the Kenyan Shilling to the US Dollar led to a further drop in overall input prices in May, after the first decrease in nearly four years during April. According to the Stanbic Bank Kenya PMI for May, the upturn in activity was the sharpest recorded in 20 months.

May headline PMI reading of 51.8 marked the index's best performance since January 2023. Rising from 50.1 in April, the index signaled a moderate improvement in the health of the private sector economy.

Christopher Legilisho, Economist at Standard Bank said, "Private sector activity was surprisingly strong in May, implying a further improvement in economic activity, as we had expected to see some impact from the recent floods."

"Output and new orders recorded strong gains in May as firms reported increased consumer demand. There were expansions in the services, manufacturing, and wholesale and retail sectors. However, heavy rains saw output decline in the agricultural and construction sectors."

Read also: March business activity dips on cash flow woes

Survey report says Kenyan firms increased their purchasing activity at a quicker rate in May amid rising sales and output requirements. The rate of purchasing growth was the fastest for 20 months and contributed to a stronger uplift in inventories. Additionally, companies hired more workers for the fifth month running.

“Job creation continued for a fifth successive month amid larger workloads and prospects of new business. Firms also purchased larger quantities, raising their inventory levels and improving their buffers."

After pointing to record-high rises in costs in late-2023, Stanbic Bank said the May survey data signaled a fall in overall input prices for the second month running, and the fastest ever outside of the 2020 COVID-19 lockdown.

“Encouragingly, input prices fell in May for a second month, with respondents noting a decline in fuel prices and lower imports costs due to a more favourable exchange rate. Meanwhile, output prices increased only slightly. This aligns with our view that inflationary pressures have eased. Nonetheless, wage pressures remained prevalent as firms continued to hire because they foresee improved demand," noted Legilisho.

“Though firms are positive about expectations over the next 12 months, this optimism is still well below the long-term average.”

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