NAIROBI, Kenya, May 5 – Kenya’s private sector activity continued to decline in April as inflation and political unrest led to a sharp fall in customer demand and clouded the business outlook, the latest PMI survey data shows.
The slowdown in activity coupled with concerns over the impact of high inflation saw companies post their lowest confidence levels on record during the month.
“While sentiment remained positive, only 8 per cent of respondents predicted activity to rise over the forthcoming year,” the survey noted.
The decline in business conditions saw the headline figure derived from the Stanbic Purchasing Managers’ Index (PMI) register below the 50.0 no-change mark for the third month in a row. The figure dropped to 47.2 from 49.2 in March.
Readings above 50.0 signal an improvement in business conditions in the previous month, while readings below 50.0 show a deterioration.
“In April, Kenya’s private sector output broadly deteriorated across several sectors covered by the PMI survey as the country experienced another contraction that began in February and continued through to April. Despite continued growth in export sales, deteriorating domestic market conditions due in large part to higher costs and political protests dampened business activity and domestic demand as cost pressures continued to rise,” said Mulalo Madula, Economist at Standard Bank.
According to survey panelists, the cost-of-living crisis continued to hinder business performance, while an associated bout of political unrest led to a marked drop in client demand.
The survey noted that new business inflows fell sharply and at a quicker pace than in March, despite a sustained upturn in export sales.
Similarly, business activity declined for the third month in succession, and the rate of contraction was much sharper than in the previous survey period.
Sector data indicated that the downturn was led by manufacturing and services, contrasting with expansions in the agriculture, construction, and wholesale & retail categories.
Further, purchasing levels declined solidly in April, following a slight increase in March.
Despite this, a sharp cut in activity allowed firms to store higher volumes of inputs, with some respondents citing concerns that supplies could run short due to limited cash flow
In contrast to purchasing, Kenyan companies added to their workforces in April. Employment numbers rose at the quickest pace in 2023 so far, albeit only slightly.
The upturn came amid a further increase in outstanding work, the third in the past four months.
On the price front, there were signs that cost pressures were moderating at the start of the second quarter.
Input prices rose at the slowest rate in four months, helped by softening demand and reports of an improvement in the availability of local goods, which also supported a slight reduction in average lead times.
Overall, the pace of cost inflation remained steep, as firms again highlighted rising import prices due to a depreciation in the Kenyan shilling against the US dollar.
Rising costs continued to be passed on to customers in April, indicated by another steep increase in output charges.
“Like input prices, the rate of inflation slowed from March but remained faster than the long-run trend,” the survey noted.
