Kenya: Business conditions in the Kenyan private sector worsen for the first time since November 2017
May 6, 2019
Business conditions in the Kenyan private sector deteriorated for the first time in one-and-a-half years in April, reflected by a drop in the Purchasing Managers’ Index (PMI)—produced by IHS Markit and Stanbic Bank—below the critical 50-point threshold separating expansion from contraction. The index fell to 49.3 in April, from 51.0 in March.
Dry weather conditions, owing to a delay in the advent of the rainy season, curbed agricultural output in the month, causing a marginal fall in overall activity. Many firms also highlighted problems with money circulation in the economy impeding activity. Moreover, growth in new orders weakened, in spite of another sharp rise in overseas sales. The weaker dynamics prompted firms to shed jobs from the first time since late-2017. On the price front, input costs climbed on higher fuel costs and a rise in commodity prices as the unfavorable weather weighed on the supply of raw materials. Despite the increased cost burden, firms opted to reduce output prices in a bid to ramp up demand. Nonetheless, businesses’ outlook remained optimistic.
Commenting on the latest print, Jibran Qureishi, Regional Economist E.A at Stanbic Bank stated:
"Given the delays in the long rains, the planting season for majority of farmers has been negatively impacted. Additionally, the dry spell reduced tea production without resulting in an increase in prices, due to the fact that globally tea supply has substantially increased. Granted, the long rains have started now, however private consumption is always also dragged lower during periods where the weather is poor owing to the high dependence on the agrarian sector.”
Author: Nihad Ahmed, Economist