Kenya: Private-sector conditions deteriorate for second consecutive month
The Stanbic Bank and S&P Global Purchasing Managers’ Index (PMI) rose to 49.2 in March from 46.6 in February. As such, the index remained below 50.0, indicating a softer deterioration in private-sector business conditions from the prior month. March’s result marked the second consecutive month in contractionary territory following five straight months of expansionary readings.
March’s higher reading was explained by softer falls in output and new orders, and improvements in employment and purchasing activity. Finally, input cost inflation remained high amid exchange rate depreciation and the scarcity of dollars making imports more difficult. This led to an acceleration in output cost inflation.
On the outlook for business activity, Mulalo Madula, economist at Standard Bank, commented:
“The La Niña weather pattern […] is slowly waning, with forecasts predicting […] the possibility of El Nino gradually developing, reaching a significantly higher probability of around 55% in June-August which may keep growth in the large agriculture sub-sector volatile. Overall, confidence plunged to its lowest level in three months, but businesses remained optimistic about Kenya’s business environment, especially in the manufacturing sector.”