Covid-19 Slows Kenya’s Private Sector Activity in March: PMI Report

Kenya Private Sector Activity Falls by 49.7 in January on Poor Cash Flow

President Uhuru Kenyatta today toured the Mwea Rice Mills (MRM) in Wang'uru PHOTO: State House Feb 1, 2020

Activity in Kenya’s private sector slumped at its lowest in March, due to the fresh restrictions following a surge in coronavirus cases, according to the latest Purchasing Managers Index (PMI).

According to the index, the drop was its lowest for nine months in March as private sector companies reported only a marginal expansion in output and a slowdown in new order growth as cash flow issues limited customer spending.

The Stanbic Bank Kenya PMI Index fell to 50.6 in March from 50.9 in February.

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

“This month’s reading indicates a marginal improvement in business activity before the new public health restrictions were announced. Demand growth was negatively affected by a resurgence in COVID-19 which resulted in households conserving cash and prioritizing spending to essential items,” said Stanbic Bank Fixed Income and Currency Strategist Kuria Kamau.

“Firms’ outlook for output worsened on account of the resurgence in COVID-19 which is expected to affect demand.”

“Businesses highlighted that cash-flow problems linked to the COVID-19 pandemic meant that households often limited spending to essential items. As a result, sales grew at the slowest rate since last November,” noted the PMI survey.

Due to the current challenges around Covid-19 infections, business expectations for the year ahead dropped to the third-lowest rate ever seen in the series history. 

“Notably, only around a quarter of survey respondents expect an increase in output over the coming year, linked to new branch openings and hopes of rising customer orders. Most remaining firms, meanwhile, predict no change in output amid worries of a further impact from COVID-19 on-demand,”  noted the PMI survey.