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Kenya’s Business Conditions Deteriorate at 4-Month Low of 46.3 in July 

Employment in the sector posted its first rise in three months, with the number of workers rising in the agriculture, construction, and services sectors.

David Indeje is Khusoko’s Digital Editor, covering East African markets.
Employment in the sector posted its first rise in three months, with the number of workers rising in the agriculture, construction, and services sectors.

Farmer planting barley in Kenya I David Jones - Crop Nuts

Kenya’s private sector momentum hit a four-month low as the seasonally adjusted S&P Global Kenya Purchasing Managers’ Index (PMI) fell to 46.3 in July from 46.8 a month earlier. 

The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI). Readings above 50.0 signal an improvement in business conditions from the previous month, while readings below 50.0 show a deterioration.

“July data pointed to a sharp and accelerated decline in business activity in the Kenyan private sector, due to a combination of uncertainty around the upcoming election and the impact of inflationary pressures on sales,” the survey noted.

However, employment in the sector posted its first rise in three months, with the number of workers rising in the agriculture, construction, and services sectors.

“Employment was also up, ending a two-month sequence of decline. Workforce numbers were expanded to help firms provide good quality products and services to their customers.”

Consequently, uncertainties around the August 9 Kenya election and inflationary pressures saw overall private sector activity contract for the fourth straight month in the same period.

Subsequently, according to the Central Bank of Kenya’s Chief Executive Officers (CEOs) Survey for the third quarter of 2022, private sector investors have confidence in growth prospects during the year. 

Respondents expected economic activity to moderate in August due to a possible slowdown arising from political uncertainty and a wait-and-see attitude, as businesses and investors anticipate the conclusion of the elections and the formation of a new government.

“There’s a sustained optimism in the country’s economic prospects, as respondents anticipate a peaceful conclusion of the elections,” CBK stated.

However, the top executives are concerned about the weakening of the Kenyan shilling, high inflation, and declining consumer purchasing power. 

CEOs expect inflation to ease in the third quarter of 2022, positively impacting demand, production and sales volumes.

More than 900 key private sector CEOs participated in the survey between July 4 and July 15, 2022.

CBK governor Patrick Njoroge projected the inflation rate to ease from 8.3% in August 2022 following the fifth stimulus package released by the government.

“The full benefit of unga subsidy will be realised in August 2022. Retailers are yet to reflect the government-recommended price of KSh 100 per 2kg packet of unga,” said Njoroge during the Monetary Policy Committee meeting on Thursday, July 28. 

“There will be strong wholesale, retail, and manufacturing activities. Transport, storage, accommodation and food service sectors will also record strong activity because investors have high confidence in the economic prospects,” he said. 


 

David Indeje is Khusoko’s Digital Editor, covering East African markets.

In my role as Community Engagement Editor For Khusoko, I care about our audience. engaging them, getting news delivered to them across a variety of platforms, and expanding the diversity of voices on our website.

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