The health of Kenyan private sector economy deteriorated in the month of June, with business confidence slipping to its lowest since February.
- •Stanbic’s monthly Purchasing Managers’ Index PMI report links the deterioration to reports of widespread economic challenges and a negative impact on sales from protests and policy uncertainty.
- •The survey conducted between June 12th and 26th indicates that job creation continued at a mild pace.
- •New business intakes dropped at the fastest rate since November last year, leading to a drop in business confidence and weaker job creation.
Although Kenyan firms also saw a renewed increase in their input costs in June, the rate of inflation was mild and had little impact on selling charges recorded in 20 months, as was input buying growth.
“In June, momentum in private sector activity declined, reflecting several concerns, top of the list being the proposed increase in taxes via the Finance Bill 2024, and the widespread protests in response, with unrest in Kenya restraining output and new business because customers delayed spending decisions in the face of such uncertainty,” said Christopher Legilisho, Economist at Standard Bank
“After two months of increased purchasing activity by firms, there was a dip in purchasing quantities and inventories because of reduced sales in several sectors, namely construction, agriculture, wholesale and retail,” he added.
According to Legilisho, input prices, purchase prices and output prices recorded a mild increase in anticipation of the increased taxes proposed in the Finance Bill 2024. However, a stronger exchange rate and lower pump prices managed to restrain costs.
“Despite the recent upheaval, it was notable that job creation improved for a sixth month running as firms increased capacity despite the dip in overall activity. However, business optimism for the year ahead remains fragile.”
The headline PMI fell below the 50.0 neutral mark to 47.2 in June, signalling the sharpest drop recorded in seven months, which contrasted notably with the PMI’s 16-month high of 51.8 in May.
According to panel members, tough economic conditions brought on by the cost-of-living crisis, as well as protests surrounding the country’s finance bill hurt sales volumes. The downturn was partially softened by a rise in new orders across manufacturing, which was the only monitored sector to register growth in June.
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