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PMI climbs to a 26-month high

Data collected 12-27 March

• PMI Index registers at 55.7 in March

• Output growth accelerates to fresh record pace

• Growth in new orders quickens to the fastest since December 2016

The health of the private sector in Kenya improved to the greatest extent since January 2016 during March. Output growth quickened to the fastest rate since the inception of the survey in January 2014. Meanwhile, the rise in new orders accelerated to the sharpest since December 2016, underpinned by a survey-record rise in new export orders. Reflecting improved demand conditions, job creation quickened to the fastest since last May. On the price front, input cost inflation was sharp despite softening from the preceding month.

The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI™). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

The main findings of the March survey were as follows:

The seasonally adjusted PMI rose from 54.7 in February to 55.7 in March. This reflected the sharpest improvement in operating conditions since January 2016. Notably, the performance of Q1 2018 was the strongest recorded in two years.

Central to the upward movement in the headline index was another rise in business activity during March. Moreover, the rate of expansion accelerated to the sharpest since the series began in January 2014. According to panellists, favourable economic conditions and greater inflows of new work were the key factors behind output growth.

In line with the trend for output, new work at Kenyan private sector firms increased for the fourth consecutive month during March. Moreover, the rate of expansion quickened to the sharpest since December 2016, partly reflecting a survey-record rise in new export orders. Panellists also attributed higher order book volumes to a higher customer turnout and improved demand.

In response to greater output requirements, firms expanded their capacity by raising their staffing levels for the fourth consecutive month in March. The pace of jobs growth was solid and the fastest since last May.

Kenyan firms raised their purchasing activity for the fourth successive month during March. Moreover, the pace of expansion quickened to the sharpest in the survey’s history. Subsequently, pre-production inventories rose to the greatest extent since December 2016.

Kenyan private sector firms faced higher input costs at the end of the first quarter. Despite softening to the weakest in 2018 so far, the rate of input cost inflation remained sharp and stronger than the series trend. Anecdotal evidence pointed to a general rise in raw material costs, with prices for food items, fuel and transportation reportedly up since February. Meanwhile, staff costs rose at a modest pace.

Output prices increased for the fourth successive month during March. Despite easing to the weakest in 2018 so far, the rate of inflation was solid overall. Firms attributed higher selling prices to the pass-through of higher cost burdens to clients.

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