The Kenyan private sector is less optimistic about new business opportunities in 2024 with the degree of confidence slipping to a seven-month low, the latest Purchasing Managers Index (PMI) indicates.
- Employment numbers in the Kenyan private sector dropped for the fourth consecutive month in December, as firms signalled that weaker new order inflows resulted in lower workloads.
- However, after recording the sharpest fall since June 2020 in November, the pace at which job numbers fell was softer and only slight overall.
- Agriculture was the only sector to see a rise in staffing.
According to the survey, private sector firms showed only a mild degree of optimism in the year-ahead outlook in December. All five monitored sectors were subdued in their output forecasts, especially the construction industry.
The Purchasing Managers Index (PMI) improved in December, despite prevailing difficult business conditions for the private sector. Service sector companies reported an uplift in activity while declines persisted particularly in manufacturing and construction sectors, as firms continued to signal cost-of-living pressures and weak demand. But inflationary pressures have eased, amid better cash flow prospects for clients. The rate of job declines also softened compared to previous months.
“Kenyan businesses reported elevated inventories, with a slowdown in price increases in December. Firms indicated that input costs and purchase cost pressures were primarily due to higher taxes among other factors. There was notable reprieve from fuel and transport costs that moderated during the month,” the researchers note in the report, “…business expectations for the year ahead remain quite weak based on the survey results from respondents.”
- The December survey data also highlighted a marked slowdown in input cost inflation across the private sector.
- After reaching a survey-record peak in October, the rate of inflation slowed for the second month running and by the greatest degree ever noted.
- While firms indicated that currency weakness and tax burdens continued to lift overall input costs, the settling of fuel prices somewhat alleviated the rise.
In a similar fashion, average output charges rose to a much softer degree in December, albeit remaining sharp and faster than the long-run average.
Sector data showed a cooling of inflationary pressures in all segments except agriculture, with manufacturers even reducing factory gate prices. With cost pressures easing and the downturn in sales softening, purchasing activity at Kenyan firms was broadly stable in December, helping businesses to raise their inventories and deplete backlogs of work.
Lead times on purchased items shortened for the third month running.
PMI Index for Kenya up in August to 51.1 from 50.6 in July (kenyanwallstreet.com)
