Kenya's private sector payrolls showed signs of growth in April after months of stagnation, indicating increased employment and a positive outlook for future demand for goods and services amid growing concerns about devastating floods.
The results of Stanbic Bank Kenya's Purchasing Managers' Index (PMI) survey showed that spending on workers' wages and benefits rose at the fastest pace in eight months.
Feedback from about 400 company managers indicates that most major sectors such as agriculture, manufacturing, wholesale and retail trade, services and mining saw a modest increase in employee compensation.
Construction was the only sector to record a decline in staff costs, according to the monthly survey.
“Wage pressures were still prevalent as companies continue to hire staff and increase inventories as they expect improved demand,” Christopher Legelecho, an economist at South Africa-based Standard Bank, Stanbic Bank’s parent company, wrote in a PMI report on Monday.
This came against the backdrop of companies increasing their workforce for the fourth month in a row in an attempt to ease outstanding workloads and boost sales. Job creation was highest in February when employment reached a 13-month high, then slowed in March before rising in April.
Job openings rose to their highest levels in construction sectors in April, according to the Purchasing Managers' Index, indicating that contractors were hiring at lower wages due to lower overall employee expenses in the sector.
Overall, private sector activity in Kenya stabilized in April compared to the previous month thanks to easing inflationary pressures amid a stable currency.
The Stanbic Kenya PMI – a measure of private sector activity such as output, new orders and employment – rose marginally to 50.1 compared to 49.7 percent in March.
This indicates little change in trade deals on a monthly basis because PMI readings above 50 indicate growth, while levels below that indicate contraction.
“Output and new orders were neutral during the month as companies reported a balanced inflow of new business despite some companies' concerns about heavy rains across the country,” Legelecho said.
“There was a notable increase in jobs created, quantities purchased, and inventories held by businesses during the month, reflecting increases in existing workloads and new business prospects.”
Inflation, a measure of the increase in the cost of goods and services compared to the previous year, grew at the slowest pace in 42 months in April at 5.0 percent due to lower food and energy costs, according to the Kenya National Bureau of Statistics.
The shilling, on the other hand, was largely stable, trading at 133.28 units against a globally bullish US dollar at the end of the month compared to 133.80 units at the beginning – a marginal decline of 1.12 percent.
“Input prices, purchasing prices and output prices fell in April, further indicating an easing of price pressures in most sectors surveyed with the exception of construction and agriculture. This is consistent with our view that inflationary pressures have eased,” economist Stanbeck said.
The easing of inflationary pressure amid the strengthening of the shilling in the net import economy was expected to free up some cash for spending, boosting trade activity.
However, heavy rainfall disrupted activity in key sectors, including education and trade.
The resulting flooding, which damage observers say was last seen in rainfall during the El Niño phenomenon in 1998 and 1999, is expected to slow private sector activity. “We share these concerns and fear that growth will slow in Q2:24 (Q2 2024) due to widespread devastation and disruptions caused by heavy rains,” Legelecho said.
