Kenyan Purchasing Power Slightly Drops In March

Stanbic Bank released the Monthly Purchasing Managers’ Index (PMI) for March 2021, which declined for the second month to 50.6, from the 50.9 recorded in February 2021.

The decline was attributable to lower growth in new orders as consumers faced cash flow issues occasioned by the pandemic.

Key to note, readings above 50.0 signal an improvement in business conditions, while readings below 50.0 indicate a deterioration. New orders from foreign clients recorded modest growth, experiencing the lowest growth since June 2020.

Employment numbers in the private sector improved further although the increase was moderate and consequently led to a reduction in backlogs which fell for the first time since November 2020.

Cost burdens were driven higher by a sharp increase in purchase prices, attributable to the increase in local fuel prices.

Rates in the fixed income market have remained relatively stable as the government rejects expensive bids.

Read More:

• Why Kenyans Should Read And Internalise The BBI
• Stanbic’s PMI For The Month Of November Falls To 51.3

The government is 10.9 percent ahead of its domestic borrowing target, having borrowed 476.2 billion shillings against a pro-rated target of 429.5 billion shillings or the financial year 2021/2021.

Due to the current subdued economic performance brought about by the effects of the COVID-19 pandemic, the government will record a shortfall in revenue collection with the target having been set at 1.9 trillion shillings for FY’2020/2021, thus leading to a larger budget deficit than the projected 7.5 percent of GDP.

The high deficit and the lower credit rating will mean that the government might be forced to borrow more from the domestic market which will ultimately create uncertainty in the interest rate environment.

During the week, liquidity in the money markets remained favorable, with the average interbank rate declining marginally to 5.2 percent, from 5.4 percent recorded the previous week attributable to government payments and treasury securities maturities, which offset tax remittances.

Additionally, there was a 35.7 percent decrease in the average volumes traded in the interbank market to Kshs 9.8 bn, from 15.2 billion shillings the previous week.

According to the Central Bank of Kenya’s weekly bulletin released on 9th April 2021, commercial banks’ excess reserves came in at Kshs 14.1 bn in relation to the 4.25 percent Cash Reserve Ratio.