Kenya: Business conditions deteriorate in January
The IHS Markit Purchasing Managers’ Index (PMI) fell to 47.6 in January from December’s 53.7. January’s result marked the weakest reading since April. As such, the index dropped below the 50-threshold, signaling a deterioration in business conditions from the previous month.
The headline deterioration was driven by renewed contractions in output and new orders. New business inflows fell on the back of decreased client spending and travel amid the recent wave of Covid-19 cases and greater price pressures, while output was consequently scaled back. Moreover, firms dialed back their purchasing activity, which saw inventory levels drop, and job creation slow to the weakest pace since July 2021. Turning to prices, sustained price increases for raw materials and fuel drove up input price inflation to a six-month high, although output prices rose at a softer pace, in a bid to restore client sales. Lastly, business confidence regarding expectations remained subdued, with the pandemic continuing to weigh on expansion plans.
Analysts at the EIU commented:
“A return to near-normal tourism, proinvestment policies—such as facilitating public-private partnerships—deeper regional integration and rising intra-regional trade will be key growth drivers. Impediments to growth and investment will persist, including corruption, bureaucratic red tape and skills shortages, but regulatory reform and institutional strengthening will lower the barriers over time. […] Political uncertainty surrounding mooted constitutional reforms and the next elections in 2022 could also dent confidence.”