Kenya's private sector activity growth slowed in May on the back of slower increases in output, new orders and employment, a survey showed on Wednesday. The Markit Stanbic Bank Kenya Purchasing Managers' Index(PMI) for manufacturing and services fell to 55.4 in May from 56.4 in April. Anything above 50 denotes growth; anything below, contraction.
"Slightly easing from April's survey record, the rate of growth remained strong and above the series average. According to anecdotal evidence, favourable economic conditions and strong underlying demand were the key factors behind the latest expansion," Markit said.
"Despite softening from April's 16-month high, the rate of growth remained sharp overall. Panellists attributed new client wins to stronger market demand. Amid reports of stronger demand from international markets, growth in new export orders also remained strong." The report said that businesses continued to face higher input costs.
Kenya's inflation rose to 3.95 percent year-on-year in May from 3.73 percent the previous month, data from the statistics office showed. Jibran Qureishi, regional economist for East Africa at Stanbic Bank, said businesses were watching for more details on a draft law aimed at regulating the conduct of financial institutions, and if it will lead to an expansion of private sector credit growth.
Qureishi said that businesses were also watching to see if there will be an amendment or modification to a law capping commercial interest rates, in place since 2016, that has contributed to slowing private sector credit growth.
"Any additional details of the Financial Market Conduct Bill will also be sought out for given the broad concern currently that the draft Bill may not result in a more favourable environment for credit extension to the private sector," Qureishi said. Last month, the central bank criticised the Financial Markets Conduct bill, which proposes the creation of a regulator in addition to the central bank to deal with the conduct of lenders.