Business confidence at record low on inflation, political unrest
Kenyan private firms posted their lowest confidence levels on record in April, the latest the Purchasing Managers’ Index (PMI) by Stanbic Bank shows, as inflation and political unrest led to a sharp fall in customer demand and clouded the business outlook.
The index showed that activity levels and input purchases also fell sharply, but employment numbers continued to rise. On a positive note, input cost pressures showed further signs of having peaked, dropping to their lowest recorded in 2023 so far, though remaining steep.
Readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show a deterioration.
“The headline PMI registered below the 50 mark for the third month in a row in April. Dropping to 47.2 from 49.2 in March, the index also signalled a solid and faster decline in the health of the private sector economy at the start of the second quarter” analysts at Stanbic said in the PMI report.
“The cost-of-living crisis continued to hinder business performance, according to survey panelists, while an associated bout of political unrest led to a marked drop in client demand. New business inflows fell sharply and at a quicker pace than in March, despite a sustained upturn in export sales” they added.
The report said business activity similarly 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 and retail categories.
“Concerns over the impact of high inflation led to a marked drop in firms' output expectations for the next 12 months, which declined to their lowest level since the survey began in January 2014. While sentiment remained positive, only 8 percent of respondents predicted activity to rise over the forthcoming year” the analysts at Stanbic said.
Purchasing levels declined heavily in April, following a slight increase in March. Despite this, a sharp cut in activity allowed output and new orders to fall sharply.
Price pressures eased but remain marked as the outlook ahead remained the weakest in the survey’s history.
“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” Mulalo Madula, Economist at Standard Bank commented:
“The outlook for output for the upcoming 12 months significantly decreased, reaching the lowest level since the survey's inception. This was largely due to worries about the effects of high inflation as power tariffs were increased by around 19 percent in April. But then again, overall year-on-year inflation is likely to slow, having fallen to 7.9 percent in April from 9.2 percent in March, as statistical base effects continue to unwind, although underlying costs for firms are likely to remain elevated.” he added. BY DAILY NATION
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