Kenyan Private Sector Falls To 11-Month Low

Kenya’s private sector deteriorated to an 11-month low in February as several key metrics fell into contraction territory, according to the latest PMI Survey by Stanbic Bank Kenya.

According to the PMI, output and new orders, both recorded sharp falls, leading to renewed cuts in employment and purchasing. The sharp fall in sales came amid reports that cost-of-living pressures and cash flow problems had stunted customer spending.

“Currency weakness and reports of increased tax burdens fed through to a sharper rise in input costs, and one that was among the fastest seen since the series began in 2014. While some firms passed these costs on to customers, the rate of charge inflation was broadly unchanged from January and much softer than that of input prices,” stated part of the survey.

The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI). Readings above 50.0 signal an improvement in business conditions in the previous month, while readings below 50.0 show a deterioration.

“For the first time in six months, the headline PMI registered below the 50.0 no-change mark in February, dropping to 46.6 from an 11-month high of 52.0 in January. The reading indicated a solid deterioration in operating conditions, driven by renewed contractions in many of the covered metrics,” said Stanbic.

Demand weakness was particularly clear in the latest survey data, as companies reported a sharp contraction in new order volumes following a solid upturn in January. Survey panellists frequently noted that customers had pared back spending due to high inflation and a lack of money in circulation. Firms also suffered from a marked fall in export sales, one of the fastest seen on record.

“Output fell sharply and for the first time in four months, while input purchases fell for the first time since last August. While job losses were only mild overall, they were the strongest seen since April 2021.”

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