Businesses improve, create jobs – survey

Posted by Sana on 11/17/2016 in Weak Credit | Short Link

Private sector activities improved to a five-month high last month, a monthly market survey suggested yesterday, citing increased new orders, production and job opportunities.

The Standard Chartered-MNI Business Sentiment for Kenya rose to 63.7 from 58.7 in August, the highest level since December 2015.

The monthly review shows new orders surged to a new 2016 high, with the production and employment indicators also rising.

Firms reported a pick-up in business activity with the overall business conditions indicator rising 15.9 per cent in September to 76, its highest level since December 2014. Three of the five components that make up the headline indicator posted gains with businesses reporting a strong surge in demand as new orders rose by 16.7 per cent month on month.

“Production and employment indicators also increased. Together, these three indicators contribute 75 per cent of the headline BSI print. Firms expect upbeat conditions to be sustained, and are increasing their hiring as a result,” the report states.

The Standard Chartered Bank Chief Economist for Africa Razia Khan however warned that credit to Kenyan businesses could fall sharply in the months ahead, due to the capping of interest rates.

Razia said banks are no longer able to price for risk.

“Weak credit growth trends in the run-up to new legislation capping loan rates has emerged as a particular concern. Should Kenya’s weak credit growth trend persist, the BSI is likely to deteriorate further in the months ahead despite the optimism seen in September,” Razia said.

Inventory levels of Kenyan businesses reached a series low in September, falling 39.4 per cent from August.

New orders are likely to remain strong in quarter four of 2016, the report states, as the festive season approaches.

“With inventory levels falling, companies have begun to increase output and intend to expand productive capacity in the next quarter. The employment indicator moved back above the 50 break-even level as firms reported increasing employment to boost production,” it states.

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