Private Sector Declines in August Amidst Elections-PMI

The prolonged election season in August further disrupted output and new orders in the private sector, with business confidence dropping to a record low, the latest PMI survey data shows.

According to surveyed businesses, the election had a notable toll on the private sector in the period, with output dropping at the quickest pace for 16 months.

“Election-linked disruption meant that some vendors were unable to deliver inputs, leading to the first lengthening of lead times since the first wave of the COVID-19 pandemic in early-2020,” the survey noted.

At the same time, businesses made fewer purchases of inputs due to deteriorating sales, while inventories were cut for the first time since January amid efforts to avoid dead stocks.

According to anecdotal evidence, lower sales, a lack of cash, increased prices, and particularly the national election all negatively influenced the output.

The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) remained below the 50.0 no-change mark for the fifth month, falling to 44.2 from 46.3 in July.

The reading is the lowest seen in the private sector since the lockdown-hit period in April 2021.

On the flip side, lower demand suppressed inflationary pressures, with costs and charges rising at the softest rates since January.

“Both input costs and output charges rose to the least extent for seven months, although there were still numerous mentions of higher fuel prices, exchange rate pressures and a greater tax burden,” the survey noted.

Meanwhile, firms were still relatively downbeat about their prospects.

Only 10 per cent of respondents gave a positive forecast for output over the next 12 months, amid fears that the inflation-driven downturn in the economy will continue.

“As such, the outlook was the third-worst on record behind those seen in April and May,” the survey notes.

With sales dropping and the outlook remaining weak, staff numbers were lowered for the third time in the past four months in August.