Kenya’s private sector activity showed marginal improvement in December 2024, with the Purchasing Managers’ Index (PMI) edging down slightly to 50.6 from 50.9 in November.
Readings above 50.0 signal an improvement in business conditions in the previous month, while readings below 50.0 show a deterioration.
Inflationary pressures intensified in December, as reflected by the sharpest increase in output prices in a year.
According to the survey, new orders, output, and employment levels increased for the third consecutive month. Similarly, input and output prices rose sharply, driven by higher input costs and increased demand.
“Positively, this is the first quarter of expansion in output since Q4:21, suggesting that the private sector is showing signs of turning around with new orders and employment also in expansionary territory,” said Christopher Legilisho, economist at Standard Bank.
Despite recent improvements, business confidence in the next 12 months remains subdued.
“While the year ends with relative macroeconomic stability, characterized by a stable exchange rate, low inflation, and declining government interest rates, private sector confidence in the next 12 months remains subdued,” said Legilisho.
Business conditions improved throughout 2024, with the average Stanbic Bank PMI for the first eleven months reaching 49.5, a 1.5-point increase compared to the same period in 2023.
November’s PMI at 50.9, up from 50.4 in October, signalled two consecutive months of improving business activity, primarily driven by stable fuel prices and lower borrowing costs, leading to increased sales.
Economic growth in 2024 is projected to moderate to 5.3%, down from 5.6% in 2023.
This deceleration is attributed to reduced private sector activity and government fiscal consolidation efforts.
Furthermore, political instability, including anti-finance bill protests and opposition to the current regime, has undermined investor confidence and disrupted economic activities, posing a further risk to growth.
