July revamps most despite redundancies

By Lewis Njoka
Thursday, August 6th, 2020
Stanbic Bank. Photo/Courtesy
In summary
    • Output index turned positive – hitting 54.2 points in July compared to 46.6 in June .
    • The growth, the report says, signals a strong uplift in overall business conditions.
    • According to the index, many firms plan to expand their businesses next year but plans will depend on the risks tied to the pandemic.

Lewis Njoka @LewisNjoka

Lifting of border controls saw July record strongest improvement in overall business conditions in the last 13 months.

According to Stanbic Bank’s Purchasing Manager’s Index (PMI), there was renewed improvement in economic performance in July, with the index rising above the neutral 50.0 mark for the first time since December 2019.

Index readings above 50.0 signal an improvement in business conditions, compared to previous month, while readings below 50.0 show a deterioration.

Strong uplift

“At 54.2 in July, the index was notably higher than 46.6 in June and signaled a strong uplift in overall business conditions that was the sharpest seen for 13 months,” the survey says.

“Firms indicated that the lifting of Covid-19-related restrictions helped to generate higher sales in July, most notably from the removal of regional border controls,” it adds.

According to the index, purchasing activity surged as businesses sought to build up stocks and prepare for a return to normal levels of demand. 

Relaxed travel restrictions helped firms to receive inputs faster compared to June, as delivery times improved at the fastest rate for 16 months.

Customer demand also rose compared to June resulting in the highest upsurge in new businesses in nearly two years. 

Export sales

Due to an increase in new orders from Europe, Kenyan export sales rose sharply at the beginning of the third quarter, which was one of the fastest since May 2018. 

“It was also the first upturn for seven months, representing a partial recovery in activity since the depths of the Covid-19 pandemic,” says the report.

However, business sentiment weakened as the outlook for activity amid the pandemic remains unclear.

While growth returned in the Kenyan private sector during July, businesses were still relatively downbeat regarding the year-ahead outlook.

Despite the improved economic conditions, however, workforce numbers declined in July but at a slower rate compared to June, says the report.

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