Kenya’s Private Sector activity recorded a deeper slowdown in July as businesses consumers cut their spending due largely to political protests which made a huge dent on demand. This is according to the July 2023 Stanbic Bank Kenya Purchasing Managers Index (PMI). Kenya’s selected firms surveyed said this contraction in output in the month of July was the fastest since August 2022 as new orders fell sharply amid the street protests and weak customer demand.
The price of inputs also rose at the third fastest rate in the history of the PMI series for Kenya.
A further depreciation of Kenya’s Shilling against the US dollar in the month of July, coupled by rising fuel prices due to the adjustment of VAT on fuel from 8% to 16%, culminated in another substantial rise in business costs in July, with the rate of input price inflation among the quickest since the survey began in 2014.
Kenya’s July 2023 PMI Readings
Output prices subsequently increased to a sharper degree as business optimism waned slightly, while jobs growth eased. The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
The latest reading indicated a greater slump in operating conditions over July, with the pace of deterioration accelerating to the fastest in almost a year.
At 45.5, the index was down from 47.8 in June, registering below the 50.0 neutral mark for the sixth month in a row. Deteriorating operating conditions were driven by a sharp and accelerated fall in new business inflows, as Kenyan firms highlighted a drop in client demand due to the cost-of living crisis.
Kenya’s July heated street protests hurt its economy
Alongside this, several firms noted that political demonstrations had adversely affected sales. Four of the five monitored sectors recorded a decline in sales in July. Agriculture was the sector to register growth.
With overall sales falling rapidly, Kenya’s business sector indicated a sharp drop in output over the course of July, which was the second-worst since 2017 when excluding lockdown-affected periods.
Higher fuel prices and increased tax burdens were also cited, while some firms reportedly upped their workers’ salaries amid the cost-of-living crisis.
Notably, the rise in overall input costs was one of Kenya’s sharpest seen since data collection began in 2014, resulting in a robust and faster uplift in selling charges.
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