Kenya’s private sector activity contracted in February for the first time in six months due to the weakening of the shilling and growing tax burdens for firms; a survey showed on Friday.
The S&P Global Kenya Purchasing Managers’ Index (PMI) fell to 46.6 in February from 52.0 a month earlier.
Readings above 50.0 signal growth in business activity, while those below that point to a contraction.
Demand weakness was evident in the survey data, as companies reported a sharp contraction in new order volumes following a solid upturn in January.
Survey panellists noted that customers had pared back spending due to high inflation and a lack of money in circulation. Firms also suffered from a marked fall in export sales, one of the fastest seen on record.
The downturn in sales led Kenyan companies to make renewed cuts to activity, employment, and purchasing in February.
Supply chain performance was broadly stable in February. Output fell sharply for the first time in four months, while input purchases fell for the first time since last August. While job losses were mild overall, they were the strongest since April 2021.
“But then, while the sales decline was broad-based, agriculture was the only sector where sales increased. Notably, the decrease in activity was uneven across firms in various sectors, with 38% of panellists reporting a drop in activity compared with a quarter of respondents reporting an increase. But then, despite everything, businesses are still optimistic about the outlook for the next 12 months, with the future output index rising for the second month in a row,” said Mulalo Madula, an economist at Stanbic Bank.
In February, headline inflation accelerated to 9.2% from 9.0% observed in January, attributable to increasing food and fuel prices amidst the persistence of supply-chain disruptions and a drawdown on
domestic supply.
