Business Activity Rises in February on Low Covid-19 Infection Rate

Business activity as measured by Stanbic PMI rebounded in February as new orders strengthened after a significant dip at the start of the year due to the Omicron wave of the pandemic.

“Domestic demand recovered strongly in February driven by increased customer numbers following a reduction in Covid-19 cases as well as heightened marketing efforts by firms. Firms responded to the higher demand by increasing their output and quantity of purchases significantly during the month,” Kuria Kamau, Fixed Income and Currency Strategist at Stanbic bank.

The headline Purchasing Managers Index reading which signals an improvement or decline in business activity rose above the 50.0 neutral threshold, to 52.9 in February up from 47.6 in January.

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

The fall in infection rates prompted an increase in customer numbers, however, cash flow issues meant that employment dropped for the first time in ten months.

With input demand rising, alongside increases in tax burdens and global material prices, firms’ overall costs grew at the sharpest pace since September 2018.

New business levels at Kenyan companies rose sharply in February, as survey panelists commented on a rebound in customer demand and increased marketing efforts. The rate of growth was the second-fastest since October 2020.

Export sales rose to a much greater extent than in January, but growth remained weaker than seen in the fourth quarter of last year.

Manufacturing and agriculture firms experienced the strongest upturns in output during February. By contrast, wholesale & retail was the only sector to see activity decline.

The rate of overall input cost inflation was the strongest seen since September 2018. Output charges were raised at a solid pace accordingly.

Despite rising input prices, purchasing activity expanded sharply and at the quickest pace for 16 months. This helped firms to bolster their stocks amid increased confidence that sales would continue to grow.

In relation to this, business optimism surrounding future business activity picked up fractionally to the highest since last September.

Survey respondents often cited plans to expand into new markets and gain customers through marketing efforts.

Read also; Business Activity Rises Sharply in January.

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