Standard Bank Kenya’s Purchasing Managers Index (PMI) has signalled the quickest increase in private sector output charges in the survey’s history during the month of June as the uplift was widely associated with rising fuel levies, which led to another pick up in total input cost inflation.

According to a press statement to newsrooms, rising business expenses also contributed to a reduction in output, even as customer orders showed signs of revival.

Despite these challenges, Kenyan firms were the most confident about future activity for almost three-and-a-half years in June, as an increase in sales boosted sentiment and led to higher backlogs, fresh job creation and restocking efforts.

Combined, these signals led the headline PMI to rise considerably from the month of May with the latest readings indicating that operating conditions stabilized in June, following contractions in each of the past three months.

However, business activity remained a negative influence on operating conditions in June, as the latest survey data signalled a downturn in output for the fourth month running.

Notably, many panellists continued to face subdued client numbers, whilst some noted supplier capacity cuts and reluctance to purchase inputs linked to rising cost burdens and limited cash flow.

“The pace at which output contracted was less steep than that seen in May, but marked nonetheless,” read the statement.

Positively, new order inflows returned to growth territory for the first time since February, albeit with only a modest rise overall.

Firms reporting a boost in sales often suggested these had been earned through customer referrals, marketing campaigns and business growth initiatives.

Therefore, this mismatch between output and new orders in Kenya’s private sector resulted in a solid increase in unfinished business. Further, panellists also suggested that vendor delays and higher input prices contributed to the rise.

On the former, June data signalled the greatest lengthening of overall supplier delivery times since April 2020, as firms noted that product shortages and higher fuel prices had often made vendors reluctant to deliver goods until transport capacity was full.

“Around 41 per cent of monitored companies reported an increase in total input costs in June, pushing the rate of overall cost inflation to its highest level since November 2023,” the statement read.

Panellists pointed out higher costs for items such as foodstuff, paper, IT equipment and construction materials due to the impact of fuel prices.

Equally, the marked surge in business costs underscored a record mark-up in average prices charged at Kenyan firms in June, which culminated a sharp acceleration in selling charge inflation seen over the course of the second quarter.

Considering the steep increase in costs, firms reduced their input expenditure for the second month running. Nevertheless, stock levels rose slightly as some firms built inventories amid strengthening confidence. An increase in employment was also recorded, following a slight decrease in May.

Meanwhile, output expectations improved for the second straight month in June to reach their highest level since February 2023.

Anecdotal evidence showed that firms broadly looked beyond current inflation concerns and were buoyed by planned business developments, new market entries, greater marketing, and innovation.

• A Tell Media / KNA report / By Michael Omondi