Private sector activity weakest in June this year

Kenya’s private sector activity contracted sharply in July, marking the steepest downturn in a year.

Stanbic Purchasing Managers’ Index reading dropped to 46.8 last month, which is the lowest in a year, from 48.6 in June, pointing to a sharper deterioration in business conditions.

A Purchasing Managers’ Index reading below 50 signals a contraction in activity.

Business activity, particularly in the manufacturing and services sectors, slowed as firms faced weaker customer demand, high input costs, and the effects of political protests.

38pc of businesses reported lower output in July, citing weak consumer demand, high operating costs, inflation and disruptions linked to political protests while 17pc of the respondent saw a rise with businesses in, agriculture, construction, and retail showing some resilience.

“PMI shows that political unrest, rising inflation and tighter consumer budgets continue to weigh down business performance, especially in urban centres adding that overall, the private sector activity is mixed in the sense that certain sectors are doing well, while other sectors are struggling under the weight of weak consumer demand conditions,” said Stanbic Bank, Economist, Christopher Legilisho.

Input costs rose at the fastest rate in seven months, with businesses citing sharp increases in fuel prices and taxation.

This saw businesses passed on the costs to consumers, pushing selling prices to their highest level since January.

“However, optimism about the future remains intact as firms eye recovery through new products and expansion,” he added.

Despite this, employment levels remained largely stable notwithstanding the dip in output and business confidence rose the highest level in 15 months, a sign that companies are hopeful about a future rebound.

The data was collected covered around 400 private sector companies across key industries.