Business conditions contracted slightly in September, implying that the pickup in August was due to some recovery after the disruptions caused by protests earlier this year.
- •According to the latest Stanbic Purchasing Manager Index, there was a drop below the 50.0 no-change mark, falling to 49.7 from 50.6 in August, to indicate a slight deterioration in the health of the Kenyan private sector economy.
- •A renewed decline in new business across the service sector coincided with sustained contractions in the agriculture and wholesale & retail segments.
- •At the same time, manufacturers and construction firms registered higher sales.
Despite lower demand on average, Kenyan firms reported an expansion in their purchasing activity for the second month running.
Survey respondents linked the move to the shoring up of stocks amid hopes that sales will strengthen. Inventories of inputs rose at a modest pace that was the quickest since May, supported by a slight reduction in average lead times.
Stable workforce numbers were also recorded in September, as firms noted there was little need to hire new staff or replace voluntary leavers. This was partly due to a softening of capacity pressures, with the survey data indicating little change in firms’ outstanding business after a recent run of accumulation. In addition, Kenyan firms continued to show a subdued level of confidence towards future activity, with only 4 per cent of survey members expecting an upturn over the coming year.
On prices, the September survey data provided hopeful signs of an easing in inflationary pressures at the end of the third quarter. A softer increase in purchase prices led to the weakest uptick in total business expenses in the current four-month sequence of inflation. The marginal rise in input costs led to a similarly mild uplift in prices charged, as companies with inflated costs generally opted to pass these on to customers.
“New orders and output were weak due to subdued consumer demand – notwithstanding some firms reporting increased client turnout and higher investments. The agricultural sector, wholesale and retail sectors and services recorded declines, though the manufacturing and construction sectors both ticked up,” notes Christopher Legilisho, Economist at Standard Bank.
“Positively, employment in the private sector stabilised in September, after declining in August, while firms noted higher inventory stocks held as well as input purchases made, reflecting expectations for demand conditions improving in Q4:24,” he said.
According to the data, there was a moderation in the expansion of purchase prices and wages in September, reflecting stable input prices for most businesses. Notably, the exchange rate and fuel prices have stayed unchanged over the past two months, as reflected in the survey. “We anticipate inflation to be muted in September at around 4-4.5 per cent. However, business expectations for the coming year remain at their weakest levels in a decade due to the economic headwinds of this year.”
