Kenyan Private Sector Deteriorates As Elections Approach

By Soko Directory Team / Published August 8, 2022 | 10:07 am

KEY POINTS

The decline was largely attributable to the prevailing inflationary pressures with the inflation rate for the month of July coming in at 8.3%, from the 7.9% recorded in June 2022.

KEY TAKEAWAYS

Kenya’s general business environment continues to deteriorate with the average PMI for the last seven months coming in at 48.8, as the cost of living remains elevated thus forcing consumers to cut spending.

Stanbic Bank released its monthly Purchasing Manager’s Index (PMI) highlighting that the index for the month of July 2022 declined for the fourth consecutive time to 46.3, from 46.8 recorded in June 2022.

The PMI pointed toward a further deterioration in the business environment in the Kenyan private sector. Notably, this was the lowest reading since April 2021, when the index came in at 41.5.

The decline was largely attributable to the prevailing inflationary pressures with the inflation rate for the month of July coming in at 8.3%, from the 7.9% recorded in June 2022.

The private sector was characterized by a rise in input costs, occasioned by the high fuel prices as fuel is a major input which consequently led to a decline in new order volumes due to reduced consumer spending.

Key to note, purchasing activity by businesses recorded the highest decline since April 2021, but the stock of purchases continued to rise as firms continued to accumulate stocks to ensure sufficient inventory levels to cater to future order needs.

The key challenge remains the cost of input materials such as fuel which has been further accelerated by the depreciation of the Kenyan shilling.

Going forward, we maintain our view that the recovery of the private sector business environment in Kenya is largely pegged on how quickly the global economy stabilizes, how well the Independent Electoral and Boundaries Commission (IEBC) conducts the August elections and how soon the inflationary pressures ease.

During the week, liquidity in the money markets eased, with the average interbank rate declining to 5.3% from 5.4% recorded the previous week, partly attributable to government payments that offset tax remittances.

The average interbank volumes traded declined by 0.2% to Kshs 21.4 bn from Kshs 21.8 bn recorded the previous week.

About Soko Directory Team

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