The private sector’s seven month run of improving business conditions suffered a mild halt in May as rising prices contributed to a drop in customer spending.
- •The headline Stanbic PMI dropped from 52.0 in April to 49.6 in May, printing below the 50.0 no-change mark for the first time since last September.
- •This indicated a slight decline in the health of the private sector economy, following improvements in each of the previous seven months.
- •Business expectations for the next 12 months remained subdued, ticking down to their second-lowest on record.
“The Stanbic Kenya PMI signalled fragility in the private sector’s recovery. There was a moderate contraction in output, and a decline in new orders after seven months of expansion,” said Christopher Legilisho, Economist at Standard Bank.
“Purchasing activity was also down, reflecting a lack of new projects. Consumers remain hesitant to spend due to concerns about their economic state and the dim outlook. Still, whereas output, new orders and purchasing activity declined, employment and inventories rose, while backlogs remained steady.”
Input price pressures accelerated over the course of May, which businesses mainly attributed to greater purchase prices and heightened tax payments.
The increase in costs for the private sector was the quickest since January, but remained well below the series’ long-run trend. With demand weakening, Kenyan firms made some efforts to contain the impact of higher costs on customer prices. The rate of output price inflation eased to a seven-month low and was marginal.
Just 4% of surveyed firms anticipate an improvement in output, citing expected branch openings and new marketing strategies.
