Kelly said: "You have to give United credit for last weekend in taking the one chance they had the whole game and coming away winners.
"But we played really well and had loads of chances in the first half against the reigning champions. If one of those had gone in, it would have been a different game.
"But although we were devastated after the game, we have to take a lot of confidence from the way we played.
"The good thing is we limited their goal-scoring chances like we had done at Liverpool the previous week, but against United our attacking side of things was better as well."
Kelly does not believe Birmingham have received the credit they deserve for drawing at Anfield and pushing United all the way.
He said: "It's annoying when people say Manchester United were off form because that doesn't give us credit for the way we played.
"People said similar things when we played Liverpool but I think that's taking away from our own level of performance. If we keep playing like that, then we can expect good things this season.
"We've had eight games and in that time we've played Chelsea, Liverpool and Manchester United and come out of all of those games with our heads held high. Now we have to take that form into the Blackburn game which will be tough."