Kenya: Private sector PMI increases in June but remains in contractionary territory
July 3, 2020
The Purchasing Managers’ Index (PMI)—produced by IHS Markit and Stanbic Bank Kenya—increased notably to 46.6 in June from 36.7 in May. Although the index logged an improvement compared to the previous month amid easing of containment measures, it still remained below the 50-threshold, signaling deteriorating business conditions in the private sector.
June’s reading largely reflected continued downturns in the private sector as demand remained muted. However, output and new orders declined at a softer rate compared to the previous month due to a reduction in curfew hours. As such, the rate of job shedding also softened in June, as firms cut staff at the slowest pace in three months. On the price front, input prices fell as firms continued to cut wages in an effort to lower costs for the third consecutive month. Output charge prices, however, dropped at a weaker rate than in May. Lastly, sentiment among firms deteriorated in June, as the outlook for activity for the year ahead dropped to the worst since August 2016.
Commenting on the reading, Jibran Qureishi, regional economist at Stanbic Bank, noted:
“A resumption in cargo flights in addition to the gradual re-opening of economies around the world, is underpinning external demand. However, the damage done by Covid-19 could last for the better part of the next 6 months, notwithstanding what official growth statistics may indicate. The impact from the loss of jobs and subsequent decline in consumption will probably be felt for a while."
Author: Hanna Andersson, Economist