Businesses report improved business environment despite rising input costs
Businesses continue to record expansion despite an increase in input costs. Photo / File
What you need to know:
- Stanbic notes that the private sector remains in the growth territory due to expansions in output, new orders, and employment
The Stanbic Purchasing Managers’ Index indicates that businesses faced high input costs, which impacted the cost of production and profitability in September.
However, despite increased costs, Stanbic noted that the private sector remained in the growth territory due to expansions in output, new orders, and employment, with sequences extending to six months, supported by strong demand, successful advertising campaigns, and new customer wins.
Stanbic also noted that whereas other sectors recorded broad-based expansions, construction recorded a renewed decline due to increased overall input costs.
The Index, which interviews different company purchasing managers and chief executive officers noted that high utility bills (including water and electricity) and supplier prices were driving factors behind rising input costs, which firms indicated had been passed through higher costs to customers, thus an increase in selling prices.
Mr Christopher Legilisho, the Stanbic economist, said despite the increase in costs, business conditions improved in September, with strong output and growth in new orders linked to robust client demand, reinforced by effective advertising.
Therefore, he said, the majority of interviewed managers anticipate healthy demand conditions over the coming year, which will in turn influence an increase in investment.
“Both input and purchase prices increased relative to August, reflecting higher prices for raw materials as well as higher utility bills. Wage prices broadly stagnated in September as businesses increased output prices, thereby passing the higher costs on to consumers. Positively, this did not translate into high inflation during the month as the rate of inflation declined to 3 percent from 3.5 percent,” he said, noting that employment remained healthy with firms stepping up purchases and inventory stocks on the expectation of sustained strong demand.
Stanbic noted that companies had expanded their workforce, extending the sequence of job creation to a year-and-a-half, with majority of firms seeking to bolster their capacity to deplete backlogs.
Business executives indicated that the increase in employment was largely due to an optimistic year ahead with businesses stepping up their input buying to boost inventories, amid improved vendor performance.
Therefore, the Index noted the private was optimistic in the outlook for output over the coming year, with positive sentiment related to further planned investment in advertising following recent successes, the launch of new product lines, and hopes of growth in new sales, suggesting continued growth in all the measured business sectors.
