NAIROBI, KENYA: Companies are recording reduced business amid concerns of price hikes by suppliers, forcing them to transfer additional costs to consumers.
The state of affairs has seen demand for goods and services in the local market fall significantly, although demand from foreign markets has recorded a modest improvement, according to the latest Standard Chartered-MNI Business Sentiment Indicator (BSI) Report.
The report, released on Thursday, shows domestic demand fell by 4.4 per cent in January. The rise in prices and fall in demand are expected to continue in the coming months, owing to the prevailing difficult business environment.
The Chartered-MNI Business Sentiment Indicator recorded a 4.5 per cent drop to 59.6 per cent as January came to a close.
Generally, the indicator is a reflection of what company managers and other top business leaders think, considering how their businesses fared in the prevailing business environment.
Of concern also is falling production and productive capacity for companies. According to the report, production fell by 9.9 per cent while productive capacity dropped by 3.4 per cent.
“Companies’ experiences seems to confirm that some of their concerns in December are being realised,” said Standard Chartered Chief Economist for Africa Razia Khan.
The indicator usually measures five factors - new orders which companies are placing, the amount of production that the companies are putting in, the ability to create new jobs, the ability to absorb more supplies and the backlog of orders that companies have.
“Of the five components of the headline indicator, four – new orders, production, employment and supplier delivery times - which together account for 85 per cent of the headline indicator – registered declines.
Only order backlogs increased during the period under review. Companies reported slower production and demand in January,” says the report. Companies were also concerned about the inflation outlook. The latest data from the Kenya National Bureau of Statistics released on Tuesday showed that inflation had hit 6.99 per cent, the highest in 11 months. The heightened inflation has been powered by a rise in food and non-alcoholic beverages prices, owing to the current drought situation in the country.
At its Monetary Policy Committee meeting on Wednesday, the Central Bank of Kenya addressed risks to the inflation outlook, saying that it does not expect inflation to breach its 7.5 per cent target.
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