Kenya’s private sector shrank for the first time in three months on rising consumer prices and living costs, the latest purchasing managers’ index data shows.
Data from Stanbic Bank Purchasing Manager’s Index (PMI) showed that the month of April 2022 declined to 49.5 from 50.5 recorded in March 2022 pointing toward deterioration in the business environment.
The average PMI for the first four months of 2022 came in at 50.1, higher than the 49.1 recorded in the same period in 2021 indicative of an improved business environment over the period.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
The decline was partly attributable to a rise in input costs, marking an eight-year high and a decline in output on the back of persistent supply chain constraints which led to increased cost pressures on the consumers.
Output and new orders fell as clients reduced their spending due to marked increases in selling prices, fuel costs and other living expenses.
However, employment increased to a lesser degree than the previous month. The increase in staff capacity, alongside lower demand, helped lead to a stabilization of backlogs of work.
“Domestic demand fell, driven by reduced client spending following significant increases in food and fuel prices. Output prices rose at the fastest rate on record as firms passed on the highest input inflation recorded over the past 8 years. In response to the lower demand, firms reduced their output at the fastest rate since the last round of lockdowns in April 2021,” Kuria Kamau, Fixed Income and Currency Strategist at Stanbic Bank commented.
“The inflationary pressures have further dimmed the 12-month outlook by firms to a new all-time low in April.”
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