The Kenya PMI® indicated a build-up of price inflation at the end of 2024, as a sharp increase in input costs led private sector firms to raise selling prices at the quickest rate since December 2023.
The pick-up in cost burdens came as sustained growth in new orders and business activity prompted the fastest expansion in input buying for over two years.
According to the Stanbic Bank Kenya Purchasing Managers’ Index (PMI) Report for December 2024, the headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI). Readings above 50.0 signal improved business conditions in the previous month, while readings below 50.0 show a deterioration.
The headline PMI stood at 50.6 in December, indicating another marginal improvement in the health of the Kenyan private sector. The index dropped slightly from 50.9 in November but was above the 50.0 neutral mark for the third month.
Which areas influenced positive PMI?
The positive PMI reading was driven by three of its sub-components, as output, new orders and employment all expanded for the third straight month. Notably, this marked the first full quarter of private sector output growth since the final quarter of 2021.
Business output generally rose due to an increase in new order intakes, according to firms monitored by the survey. New orders grew moderately, with the upturn easing from November. Several panellists mentioned an improvement in purchasing power at customers, alongside new bookings and successful advertising campaigns.
Rising demand helped to sustain the current trend of input buying growth in December, with a rise in purchases registered for the fifth month in a row. Furthermore, the increase was the sharpest recorded since September 2022.
Why suppliers raised their fees in December 2024
Stronger input demand encouraged suppliers to raise their fees, according to several surveyed firms. Currency weakness and heightened tax burdens were also commonly noted.
Despite a slightly lower average wage bill, the rate of overall input price inflation accelerated to its quickest for 11 months.
As a result, selling prices at Kenyan firms increased at a sharper pace in December. The latest uplift was the fastest seen in 2024. Sector data revealed that agriculture and manufacturing firms faced the strongest rates of both input and output price inflation at the end of the year.
Kenyan firms reduced their backlogs of work for the second time in three months, indicating spare capacity in the private sector despite sales growth.
At the same time, optimism for higher activity in the next 12 months dropped to its second-lowest in the series history. Only 5% of surveyed firms expect output to rise, with these companies basing optimism on planned business expansion and new products and services.
With the outlook relatively weak, just the agriculture sector registered a rise in staffing in December. Total employment growth was only fractional. At the same time, businesses offloaded stocks to avoid wastage, leading to the first decline in inventories for five months.
