Economic Conditions in Kenya’s Private Sector Deteriorate

NAIROBI (Reuters) – Kenya’s private sector experienced a slight decline in business conditions in September, with output and new orders contracting again, reversing a brief recovery noted in August, according to a report by Stanbic Bank.

The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) dropped to 49.7 in September from 50.6 in August, falling below the 50.0 threshold that indicates growth, marking the third decline in four months.

“Business conditions contracted slightly in September, implying that the pickup in August was due to some recovery after the disruptions caused by protests earlier this year,” said Christopher Legilisho, an Economist at Stanbic Bank.

The survey highlighted that economic challenges faced by businesses and households led to reduced sales and a new drop in activity. Nonetheless, this slowdown also contributed to decreased input price inflation, leading to only a marginal rise in output prices.

Despite the overall decline, some sectors showed improvement, specifically manufacturing and construction firms, which reported higher sales. Conversely, the agriculture, wholesale & retail, and services sectors faced declines.

Employment levels remained stable, with the employment subindex at the 50.0 no-change mark. Firms reported minimal need to hire new staff or replace voluntary departures due to lowered production capacity.

Input price inflation eased, resulting in the weakest rise in business expenses observed over the last four months. This modest increase in input costs translated into a slight rise in prices charged to customers.

Expectations for business in the coming year are subdued, with only 4% of surveyed respondents anticipating an upturn.

“Business expectations for the coming year remain at their weakest levels in a decade due to the economic headwinds of this year,” Legilisho added.

The survey noted that stable exchange rates and fuel prices over the preceding two months contributed to the moderation of cost pressures, with inflation expected to stay muted at around 4-4.5%.