The Purchasing Managers’ Index(PMI) for Kenya dropped to 50.5 in March, down from 52.9 in February, as effects of the ongoing Russia-Ukraine conflict affected the price of food, fuel and fertilizer.
According to Kuria Kamau, Fixed Income and Currency Strategist at Stanbic Bank, business activity was up in March but slower as inflationary pressures led to subdued consumer demand while producers cut down on output.
In March, consumers cut their spending, leading to firms’ slower increase in sales volumes. This is the second such contraction in three months.
PMI readings above 50.0 point to improved business conditions, while below 50.0 show a deterioration.
In March, there was a fall in consumer demand as inflationary pressures soared, as costs rose to the highest level in 8 years.
Purchase prices were exacerbated by the war in Ukraine and government taxes.
Concerns over impact of the war on global supply meant that inputs such as fuel, food products and fertilizer rose sharply in price.
Output in March declined due to contractions in the agriculture, construction and wholesale & retail sectors.
Conversely, input purchasing continued to increase sharply as firms looked to stockpile goods amid worries that supply could worsen.
A further improvement in vendor performance helped inventories rise at the fastest pace since November 2020.
Concerns of rapid price inflation hit business confidence during March, which dropped to the lowest level since the survey began in January 2014.
On a positive note, firms registered a modest rise in employment numbers during March, amid efforts to boost capacity and complete new sales.
PMI Purchasing Managers’ Index is considered one of the most closely watched surveys globally, available in over 40 countries and tracked by financial markets, business decision-makers and central banks.
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