Kenya: PMI edges up in July but remains within contractionary territory
August 3, 2017
The composite Purchasing Managers’ Index (PMI), produced by IHS Markit and CfC Stanbic Bank, rose to 48.1 in July from a survey-record low of 47.3 in June. Nevertheless, the index remains below the crucial 50-point threshold which separates expansion from contraction, signaling a continued deterioration in business conditions albeit at a slower and more moderate pace.
Output continued to fall in July, although the rate of decline slowed compared to last month. Weaker domestic demand, exacerbated by customers facing money shortages amid high inflationary pressures and tensions fueled by the heated presidential election, induced the reduction in output. However, new orders rose in July after stagnating last month aided by solid export growth as demand from key international markets rose. Employment increased marginally as there were greater backlogs due to new customers and cash flow constraints. Despite facing higher cost burdens, firms continued to offer discount prices in a bid to attract new clients in the face of stiffer competition. Moreover, the survey indicated a rebound in purchasing activity and inventories, which suggests that firms expect demand to improve going forward.
Author: Nihad Ahmed, Economist