Kenya’s private sector jobs for September expanded at the fastest pace since January as firms raced to clear orders from previous months, findings of a monthly survey show.
Stanbic Bank Kenya’s Purchasing Managers Index (PMI) found that companies increased workforce for the fifth month in a row, with salaries growing fastest in three months as a form of motivating staff and compensation for extended working hours.
However, the survey — which tracks performance in key economic sectors such as agriculture, manufacturing, construction, wholesale and retail, services and mining — found rising living costs hurt consumer spending and new orders for September.
“All five sectors added to their workforces during the month, with particularly sharp increases seen in construction and agriculture,” analysts at Stanbic Bank and UK researcher, IHS Markit, wrote in the PMI report released Tuesday.
“Capacity pressures led firms to increase their staffing levels at the strongest rate since January.”
The PMI report, nonetheless, showed growth in business deals in September was slowest since private sector activity started picking up after a decline that followed the last round of stiffer containment measures in April.
The overall PMI reading, which gauges month-on-month private sector activity, dropped to 50.4 last month from 51.1 in August.
This suggests economic recovery just stayed above the 50 mark, which separates growth from contraction.
“Business conditions continued to improve in September, but at the slowest pace in the past five months due to rising inflation,” Mr Kuria Kamau, a fixed income and currency strategist at Stanbic Bank, wrote in the PMI report.
“Firms hiked output prices to protect their profit margins following a rise in fuel prices during the month.”
The slowdown in the private sector output, which started in June, persisted last month, signalling a softening recovery in economic activity.
Companies have cited increased cost of inputs such as raw materials due to constraints in global supply chains and July taxation measures such as a 20 percent excise duty on fees and commission on loans for cutting down on output, a signal for a slowdown in economic recovery.
The expenses were exacerbated by a bump in fuel prices in September.
Petrol and diesel prices were raised Sh7.58 and Sh7.94, respectively, to historic highs of Sh134.72 and Sh115.6 per litre in Nairobi from September 15, piling pressure on input costs for firms.
This was after the Treasury rejected a Sh5 billion request from the Petroleum ministry to extend a fuel subsidy, which had been in place since April, to compensate oil marketers and cushion consumers, arguing the Petroleum Development Levy Fund was nearly depleted.
Inflationary pressure
In late September, Kenya’s central bank held its benchmark lending rate at 7.0 percent, and its monetary policy committee said it had taken note of emerging local and global inflationary pressures.
“The level of work backlogs grew as firms were only able to increase their output marginally on account of the higher input costs,” Mr Kamau wrote in the report.
“Despite improvements in the levels of employment and purchases, the future outlook for output continues to be relatively low on account of uncertainty around inflation and Covid-19.”
The Kenya Revenue Authority (KRA) reported the country was experiencing a gradual growth in employment in three months through September, a sign that economy was recovering from pandemic knocks.
This was after Pay As You Earn (PAYE) tax receipts for the review period jumped 50.63 percent to Sh107.79 billion compared to a similar period a year ago.
This is a boost to jobseekers, especially the more than one million young people who graduate from colleges and secondary schools in search of low-cadre positions like clerks.
Nearly 730,000 jobs were lost in last year when Kenya imposed coronavirus-induced lockdowns that led to layoffs and pay cuts.
The return to hiring indicates the employment market is following the ongoing economic recovery.
Easing restrictions
The World Bank expects Kenya’s economy to grow by 4.5 percent this year, as vaccinations and easing of restrictions help it recover from a coronavirus-induced slump last year. But it still remains highly vulnerable to the pandemic.
The economy contracted 0.3 percent last year.
Growth is expected to climb to above five percent in the subsequent two years, the bank said in a biannual report.
The projection for this year’s growth is based on firms boosting production and investments as lockdown measures are lifted, a slight recovery in the services sector due to vaccinations, and adequate crop harvests, the bank said.