PMI At 46.6 Percent As Inflation Drops For The Month Of June

According to Stanbic Bank’s Monthly Purchasing Manager’s Index (PMI), released earlier during the week, the seasonally adjusted PMI came in at 46.6 in June, an improvement from 36.7 in May 2020 and higher than the H1’2020 average of 42.2 but lower than the H1’2019 average of 51.7.

The lower PMI is due to lower business revenues in sectors like the Tourism and Hospitality sectors that have witnessed significant layoffs.

A PMI reading of above 50 indicates improvements in the business environment, while a reading below 50 indicates a worsening outlook.

The slow decline in output and new orders was due to the reduction in curfew hours as well as relaxed measures in Europe thus improving demand for exports.

This saw employment numbers fall at the slowest pace in the last three months.  Input costs declined for the third month in a row due to lower wage costs.

Inflation rates have remained relatively stable and we saw the average inflation rate rising to 5.6 percent compared to 5.0 percent recorded in H1’2019.

In a bid to ensure that the inflation basket is representative of what is happening on the ground, KNBS, revised the components of the Inflation basket some of the items increased include; mobile phone airtime, pay-tv, and garbage collection while they dropped archaic items such as radio and video cassettes.

The revision brings the number of items included in the commodity basket to 330 from 234 while data collection zones have increased from the previous 25 to 50.

KNBS also adjusted the weighting assigned to items in the commodity basket such as the Food and Non-Alcoholic Beverages, Alcoholic Beverages, Tobacco and Narcotics, and Transport Indices, which previously had a weighting of 36.0, 2.1, and 8.7 percent, to 32.9, 3.3, and 9.7 percent, respectively.

For the month of June, inflation came in at 4.7% with the m/m inflation decreasing marginally by 0.3 percent.

There was a 1.3 percent decrease in the food and non-alcoholic beverage index, driven by a decrease in prices of some food items such as tomatoes, Irish potatoes, and cabbages, which decreased by 12.2, 5.1, and 4.8 percent, respectively,

There was also a 0.8 percent decrease in Housing, Water, Electricity, Gas and Other Fuels Index stimulated by a 21.3 percent decrease in prices of kerosene which offset the 0.9 percent increase in electricity

The decrease was however weighed down by the 2.1% increase in transport cost driven by a 6.8% increase in pump prices for petrol which outweighed the 4.8% decrease in the cost of diesel.