Kenya’s private sector activity contracted in July for the third consecutive month, contributing to the overall downturn in the sector , but at a slower pace according to the Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) survey.
The survey indicates that the sector edged up to 48.1 during the period, from a series low of 47.3 in June. The PMI fell below the 50.0 level which separates growth and contraction in May.
“Elevated political temperatures and a lack of access to credit for firms and households, kept the Stanbic PMI in contractionary territory,” said Jibran Qureishi, the regional economist for East Africa at Stanbic Bank.
He said if the August 8 elections would end up peaceful, ‘the private sector could begin to very gradually show some signs of improvement.’
“In the event that the interest-rate-capping law remains in place for longer, economic activity is unlikely to improve meaningfully over the near to medium term,” Qureishi said.
Read: Kenya’s 2017 Growth outlook bleak on declining Private Sector Growth
The Stanbic Bank Kenya Purchasing Managers’ Index™ is based on data compiled from monthly replies to questionnaires sent to purchasing executives in approximately 400 private sector companies, which have been carefully selected to accurately represent the true structure of the Kenyan economy, including agriculture, mining, manufacturing, services, construction and retail.
The Purchasing Managers’ Index (PMI™) is a composite index based on five of the individual indexes with the following weights: New Orders – 0.3, Output – 0.25, Employment – 0.2, Suppliers’ Delivery Times – 0.15, Stock of Items Purchased – 0.1, with the Delivery Times index inverted so that it moves in a comparable direction.