Purchasing Index: Dry spell takes a toll on firms

East Africa Regional Economist at Stanbic Bank Jibran Qureishi. [File, Standard]

Businesses were hit hard by additional costs attributed to inflation and delayed rains even as customers purchasing power declined on empty pockets last month.

April also saw business activity shrink to 17-month low as agricultural production reduced on delayed long rains and low money circulation according to the Stanbic Bank Purchasers Manager Index.

The index slipped from 51.0 in March, below the psychological mark of 50.0 to post 49.3 in April.

During April, inflation hit a 19-month high at 6.58 per cent, wiping out consumers’ purchasing power while at the same time making input expensive.

With no increase in new orders, firms tried to reduce output prices. Input prices, however, rose at a quicker rate as drier than expected weather inflated commodity prices. East Africa Regional Economist at Stanbic Bank Jibran Qureishi said the lack of cash flow was as a result of pending bills by Government which has not been paying suppliers for hundreds of billions worth of goods and services.

“Various panellists continue to lament a lack of ‘money circulation’ which is creating cash flow issues. Clearly, the government isn’t adequately addressing the arrears issue owed to the private sector,” said Qureishi.

As output and new orders reduced, firms cut jobs slightly in April, the first fall in employment numbers since late-2017.