Kenyan companies froze employment in October as business activity and sales expanded at the fastest pace since February 2022, amid executives being less optimistic of future expansion.
The Stanbic Bank Kenya Purchasing Managers Index (PMI) rose to 52.5 points in October from 51.9 in September, marking the highest reading since February 2022. A reading above 50 signals improving business conditions.
That makes the current private sector activity the strongest since the world economy battled elevated commodity and shipping costs that followed Russia’s brutal invasion in February 2022, which destablised supply chains.
But about 400 panel of companies drawn from key sectors such as manufacturing, construction, agriculture, wholesale and retail and services kept the payroll unchanged, signalling that the rebound has not yet translated into hiring confidence.
More than 97 percent of surveyed companies reported no growth in staffing levels in October – meaning firms absorbed higher workloads by redeploying existing workers and clearing outstanding orders rather than recruiting.
The moderation came after Kenya’s private sector accelerated hiring at the quickest pace in 28 months in September.
Employment was the only major PMI category that did not show growth momentum in the monthly PMI that also covers output, new orders and future business prospects.
The disconnect between expanding business activity and frozen hiring could be a reflection of residual caution by corporate leaders, after months of difficult trading conditions driven by weak spending on non-essential goods and services, higher indirect taxes such as VAT and fuel levies and anti-government street protests.
‘Kenya’s private sector in October saw both output and new orders up sharply as conditions improved for consumers and firms benefited from softer inflation,’ Christopher Legilisho, economist at Standard Bank, the parent firm for Stanbic Bank, wrote in the PMI report.
‘However, firms were less optimistic about future output conditions. Employment was stable in October for most firms as they maintained their workforce.’
Future activity expectations such as to venture expand product offerings and open branches eased to a four-month low, the report shows, although optimism was among the highest levels seen since early 2023.
About two in 10 panel firms see stronger output over the next 12 months, with the remainder of the companies projecting no material change.
The PMI report indicates companies in October raised output at the fastest pace since December 2021 – before shipping bottlenecks, commodity price volatility and geopolitical uncertainty spread through supply chains around the world, including Kenya which was at the time also battling a biting drought.
The increased output, which was experienced across surveyed sectors, was largely supported by better customer confidence, new products and discounts offered to consumers amid stiff competition among vendors. New orders also rose faster than September, with about a quarter of surveyed firms recording stronger sales as inflationary pressures eased, supporting more aggressive discounting strategies and marketing in an economy where consumers remain highly price-sensitive.
Companies also raised input purchases and replenished inventories for the first time since April, indicating preparations for further demand in the months ahead.
Cost pressures remained muted, with input cost inflation softening to a 13-month low. Purchase prices, staff costs and output charges rose marginally, with some firms offering discounts to support volumes.