The ratio of companies planning to expand operations picked up in January after the Omicron scare a month earlier saw confidence among them plummet to a seven-year low, findings of a monthly survey on corporate managers say.
Data released by Stanbic Bank Kenya and IHS Markit, the data analytics firm headquartered in London, last week, shows 27 per cent of surveyed companies are planning to grow and expand their operations, compared with 19 per cent last December.
Stanbic Bank Kenya’s Purchasing Managers Index (PMI), which gauges the general direction of private sector activity such as output, new orders and employment, shows a higher number of firms was confident of investing in new outlets and products last month compared with December.
“[Future outlook] sentiment picked up from December’s series-record low to the highest since last September, amid optimism that the latest wave of Covid-19 cases has ended,” analysts at Stanbic Bank and UK’s Markit said in the January PMI report last Thursday.
Growth predictions
“Exactly 27 per cent of respondents expect output to rise over the coming 12 months, with growth predictions often linked to plans to move into new markets through product launches and branch openings.”
The modest uptick in confidence came in a month Omicron infections slowed to about 26,524 cases in January from 41,991 persons a month earlier, Health ministry of data shows.
An infections surge in December through the early days of January saw firms and households cut down on expenditure on goods and services, a survey of corporate managers between January 12 and 27 found.
That pushed down sales to a low last seen in April 2021 when public health authorities imposed partial shutdowns and travel restrictions on four counties within the Nairobi metropolitan area and Nakuru to contain the third wave of Covid-19.
Firms responded by cutting down on output since last April, hiring at the slowest pace since last July and slashing staff salaries marginally as a precaution. This resulted in the first month-on-month fall in economic activity in nine months as measured by business deals in the private sector.
Client spending
“Domestic demand fell significantly as client spending was negatively affected by rising inflation (largely as a result of rising input costs and taxes ) and a resurgence in Covid-19 due to the Omicron variant,” Stanbic Bank regional economist Kuria Kamau wrote in the PMI report.
“As a result of the lower demand, firms were forced to reduce their output and purchases of raw materials for the first time since April 2021.” BY DAILY NATION