Kenya Private Sector Activity Contracts For the First Time In Series History

Kenya’s March private sector growth has witnessed contraction for the first time, linked to the fall in activity to weaker underlying demand conditions, and lower willingness to spend, Stanbic Bank – HIS Markit Purchasing Manager’s Index released on Wednesday showed.

After having  slipped to a survey-record low of 50.1 in February, the seasonally adjusted PMI dipped below the crucial 50.0 threshold to 48.5, the first time it has come below 50, the point that separates growth from contraction.

The latest figure pointed to a modest deterioration in the health of the private sector, with growth of new business easing to a survey-record low. The rate of job creation was only marginal, while there was evidence of ongoing pressure on operating capacity.

“For the first time since collection of the data began, the seasonally adjusted PMI dropped below the 50.0 threshold that demarcates expansion from contraction. Most indicators of activity showed deceleration, pointing to weaker underlying demand conditions, exacerbated by financial constraints faced by customers,” said Jibran Qureishi, Regional Economist E.A at Stanbic Bank.

A key driver of the overall contraction was falling output at the end of the first quarter linked to weaker underlying demand conditions, and lower willingness to spend.

“The seasonally adjusted output index indicated that output contracted for the second month in a row. The pace of increase in new orders moderated further as well,” Mr.  Qureishi said.

New orders

Nonetheless, new orders expanded for the 39th consecutive month during March, although the rate of growth eased to a survey record-low.  Firms that noted an increase in new business attributed this to a rise in client demand and new projects.

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