Kenya’s private sector activity declines in April

NAIROBI, Kenya May 6-Kenya’s private sector continued to decline in April as PMI survey data signalled a decrease in customer demand in response to the high cost of living.

The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) dropped below the 50.0 no-change mark in April, falling to 49.5 from 50.5 in March.

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

“Economic activity in Kenya contracted in April due to rising inflation and supply shortfalls that negatively affected consumer demand and firms’ output. Domestic demand fell, driven by reduced client spending following significant increases in food and fuel prices,” said Kuria Kamau, Fixed Income and Currency Strategist at Stanbic Bank.

According to the survey,  price gauges remained extremely high during April, driven by increased reports of supply shortages due to the war in Ukraine while input costs rose to the greatest extent in over eight years.

Subsequently, average prices charged by Kenyan firms rose at the sharpest rate since January 2014.

Meanwhile,  Kenyan businesses reduced their activity with sales dropping for the third time in the past four months in April.

“The reduction was solid and faster than in March, with declines seen in the construction, agriculture and services sectors. At the same time, however, firms looked to build buffer stocks of items at risk of being in short supply,” the survey noted

Despite the slow down in activity, input purchases rose for the third month running, supporting a solid increase in overall inventories.

Employment numbers were also up during the month, albeit to a lesser extent than March.

Meanwhile, efforts to secure clients led vendors to reduce lead times further at the start of the second quarter.

Finally, business confidence regarding future activity dropped to a record low for the second successive month in April.

Concerns over rapid price inflation and reduced client spending meant that only 9 per cent of businesses gave a positive outlook in the survey.