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Kenya PMI February 2020

Kenya: PMI falls to lowest level in over two years in February

The Purchasing Managers’ Index (PMI)—produced by IHS Markit and Stanbic Bank—fell from 49.7 in January to 49.0 in February, the lowest reading since November 2017. Thus, it dropped further below the 50-threshold, signaling the second successive month of deteriorating business conditions in the private sector.

February’s downturn largely reflected the first fall in new orders in over two years amid lack of cash among customers. Against this backdrop, firms reduced activity for the second month running, though at a softer rate than in January. Backlogs of work continued to increase, however, on hopes of a rebound in activity, which was reflected by business confidence nearing a record-high. Upbeat sentiment also led companies to quicken their pace of staff intake. Lastly, on the price front, input cost inflation hit a six-month high partly due to reduced imports from China amid the coronavirus outbreak, which led firms to raise output charges sharply in a bid to sustain profit margins.

Commenting on the print, Jibran Qureishi, regional economist for East Africa at Stanbic Bank, noted:

“Unfortunately, at this point in time, it’s difficult to assert whether we are at the beginning, middle or end with the coronavirus due to scant and inadequate data points. A scenario where the virus is contained in the next couple of months is probably the best case. However, in the event that there is an escalation into new geographies with the disruption potentially extending into the third quarter of 2020, the likelihood of a global recession then increases. Global supply chains will inevitably be impacted by this which will be detrimental not just for local prices but also for trade in general.”

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