Kenya’s private sector saw a slight deterioration in business conditions in September as production and new orders contracted again, reversing the brief recovery seen in August, Stanbic Bank reported on Thursday.
Stanbic Bank Kenya’s Purchasing Managers’ Index (PMI) fell to 49.7 in September from 50.6 in August, falling below the 50.0 threshold that separates growth from contraction and marking the third decline in four months.
“The business climate contracted slightly in September, implying that the recovery in August was due to some recovery from the disruption caused by protests earlier in the year,” said Christopher Legilisho, economist at Stanbic Bank.
The survey highlights that the economic difficulties encountered by businesses and households have led to a reduction in sales and a further decline in activity. However, the slowdown helped reduce input price inflation, leading to only a marginal increase in producer prices.
Despite the overall decline, some sectors saw improvement, with manufacturing and construction companies reporting an increase in sales. However, the agriculture, wholesale and retail trade and services sectors recorded declines.
Employment levels remained stable, with the employment subindex at 50.0. Companies reported little need to hire staff or replace voluntary departures due to the slowdown in production capacity.
Input price inflation slowed, leading to the smallest increase in business spending in four months. The marginal increase in input costs translated into an equally slight increase in prices charged to customers.
Business forecasts for the coming year remained subdued, with only 4% of survey respondents expecting a recovery.
“Business expectations for the coming year remain at their lowest level in a decade due to this year’s economic headwinds,” Mr Legilisho added.
The survey also notes that stable exchange rates and fuel prices over the past two months have contributed to moderating cost pressures, with inflation expected to remain subdued at around 4-4.5%.
