Drop in Kenya's Inflation Rates Results in Business Growth in February

An image of employees working at a factory in Kenya
An image of employees working at a factory in Kenya
Burn Stoves

The Kenyan private sector witnessed growth in activity and new orders in February 2024, marking the first positive upswing in six months, as reported by the Stanbic Group Purchasing Manager’s Index (PMI) for the month.

Released on Tuesday, the PMI for February surged to 51.3, up from 49.8 in January, indicating expansion. This figure notably represents the first time the index has reached the 50-point threshold since August 2023.

Factors such as a consistent decrease in fuel costs and a decline in inflation rates within the country were attributed to this growth.

“There was a notable expansion in private sector activity in February, with output increasing in agriculture, manufacturing, and services,” commented Christopher Legilisho, Economist at Standard Bank.

A person refuels his car at a petrol station.
A person refuels his car at a petrol station.
Trading Room

Reportedly, fuel costs played a huge role in lowering cost burdens for Kenyans, although expenses also increased owing to currency fluctuations and more VAT Payments.

Secondly, the PMI highlighted that input costs for businesses rose at a historically low rate in February compared to the past two years.

Additionally, inflation rates declined in the country with the Central Bank of Kenya (CBK), providing 6.3 per cent as the rate of inflation for the month down from 6.9 per cent in January.

Further, the PMI explained that the gains made by the Kenyan Shilling in February were also a significant factor in the growth of the private sector.

Employment levels across the private sector reportedly increased during the month, with growth outpacing that of January.

"Moreover, the rate of increase quickened from January and was approximately in line with the series long-run trend," stated Stanbic

However, it was explained that sectors such as construction, wholesale and retail were still greatly impacted by a restricted cash flow and spending power among consumers, with them still reporting a sharp decline in sales.

Despite the gains made by the private sector, the sustainability of the growth has been questioned with few people expressing confidence in the growth within the coming months.

“Nevertheless, confidence regarding future activity fell to a survey low, suggesting a broad degree of uncertainty that activity growth will be sustained, stated the report.

A photo of  man at a manufacturing company
A photo of a man at a manufacturing company
Alliance Employment Services