Stanbic Bank Kenya Purchasing Managers Index (PMI) increased to 36.7 in May of 2020 from 34.8 in April, showing that the Kenyan private sector economy continues to face reduced activity and demand for goods and services. A reading above 50 indicates an expansion of activity compared to the previous month; below 50 represents a contraction; while 50 indicates no change.
Business activity edged up slightly in the month of May amid ongoing disruptions caused by lockdowns and night curfews during the COVID-19 pandemic.
Output and new orders declined at a steep pace, as companies reduced activity and customers stayed away to lower transmission of the virus. As a result, employment levels were reduced at a record pace, alongside a marked drop in input purchases.
Efforts to lower spending and salaries meanwhile led to an overall fall in input prices, the first seen in over five years. Subsequently, output prices were reduced as firms tried to salvage client sales less.
In Kenya, the CfC Stanbic Bank Purchasing Managers’ Index measures the performance of agriculture, mining, manufacturing, services, construction and retail sectors and is derived from a survey of 400 companies. The Index is based on five individual indexes with the following weights: New Orders (30 per cent), Output (25 per cent), Employment (20 per cent), Suppliers’ Delivery Times (15 per cent) and Stock of Items Purchased (10 per cent), with the Delivery Times index inverted so that it moves in a comparable direction.
“Driving the downturn was a considerable fall in output levels in May, as businesses reported lower activity due to weak sales,” the survey compilers said in a report.
“Demand levels were again impacted by travel restrictions around Nairobi and Mombasa, which meant some firms were unable to acquire inputs.”
Tourism and horticulture, leading sources of foreign exchange, have been hit hard by the coronavirus crisis, as have transport and manufacturing. Kenya has imposed a daily curfew, banned public gatherings and international flights. It has also imposed mandatory checks and surveillance of truck drivers ferrying goods within the East Africa region.
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