NAIROBI, Nov 5 (Reuters) – Kenya’s private sector saw a modest improvement in business conditions in October, as activity levels and employment returned to growth, an S&P Global survey showed on Tuesday.

The headline Purchasing Managers’ Index (PMI) rose to 50.4 in October from 49.7 in September, indicating a marginal upturn in the health of the private sector. A PMI reading above 50.0 signals growth, while below that level indicates contraction.

Business activity increased for the second time in three months, driven by rising sales and greater client interest, despite ongoing cash flow challenges and political uncertainty. Employment levels also rose for the first time since July, although the pace of job creation was mild.

“Despite the slight rise in output, many firms continued to struggle with cash flow constraints, tough economic conditions, rising costs and political uncertainty,” the survey reported.

Purchasing efforts accelerated, leading to the most significant increase in inventories since August 2023, as firms stocked up in anticipation of new customers. Input cost pressures remained mild, resulting in only a slight rise in average prices charged.

Confidence regarding future activity rose to a four-month high, with firms planning new outlets and investments in products and marketing. However, sentiment remained subdued compared to historical trends.

While input prices rose modestly, driven by higher tax payments and material costs, reduced fuel prices helped keep cost burdens lower than last year. As a result, the increase in selling prices was among the slowest in nearly four years.

(Reporting by Reuters; Editing by Toby Chopra)