Kenyan firms unsure of output in 2025, Stanbic PMI report shows
Kenyan firms are uncertain about economic growth in 2025 despite prevailing circumstances indicating projected growth.
This is according to the latest Purchasing Managers’ Index (PMI) report by the Stanbic Bank for last month indicating marginal improvement in the private sector despite heightened inflationary pressures towards the end of last year.
The survey by Stanbic indicates that only 5 per cent of companies are expected to expand output in 2025, mostly through new branches, additional services, and increased marketing.
“Private sector business confidence was relatively muted at the end of the year. Sentiment regarding the 12-month activity outlook was the second-lowest in the survey’s history (ahead of September). Only 5 per cent of companies expected to expand output in 2025, through new branches, additional services, and increased marketing, according to qualitative evidence,” the survey indicated.
The economy is projected to expand to 5.4 per cent in 2025 while in 2024 it is estimated to have grown by 5.2 per cent while in 2023 it grew by 5.6 per cent.
The small section that has voiced optimism on increased growth in the New Year has attributed the potential growth to internal business measures rather than macroeconomic strategies.
The report has disclosed that the private sector is still going strong despite a slight decrease in the PMI index.
The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) dipped to 50.6 in December from 50.9 a month earlier. Readings above 50.0 signal an expansion in activity.
Even so, 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.
Christopher Legilisho, an economist at Standard Bank, says the private sector has continued to show resilience following a challenging year saying it is a sign of turning around with new orders and employment also in expansionary territory.
Legisho says the improvement is attributed to increased customer sales with an improvement in purchasing power.
He added that the confidence in the business outlook for the next 12 months for the private sector is still quite weak.
“The PMI signals healthy growth in purchasing plans in December with a drop in inventories as firms push to clear stocks in the construction wholesale and retail sectors. Kenyan businesses reported increased pass-through of purchase prices and therefore raised their selling prices in December to protect their profit margins. Rising input and purchase price pressures are attributed to a further increase in demand for commodities and higher taxes, mainly in the agriculture and manufacturing sectors,” he said.
“We end the year with relative stability, a stable exchange rate and interest rates declining for government but on the downside, private sector confidence in the business outlook for the next 12 months is still quite weak,” he added.
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.
With the outlook relatively weak, just the agriculture sector registered a rise in staffing in December.
Total employment growth was only fractional with businesses offloading stocks to avoid wastage, leading to the first decline in inventories for five months.
