Kenya’s private sector growth drops to a record low

Confidence among Kenyan businesses has hit a record low as the slump of the shilling begins to take its toll on consumers, economists at CFC Stanbic have reported.

High input costs associated with imported inflation is depressing businesses and is now at its worst in 18 months.

“The PMI has fallen to its lowest level in September since data collection began back in January 2014.

The weaker exchange rate has certainly increased import costs for most firms which has consequently suppressed their profit margins, perhaps also leading to the significant slowdown in workforce growth,” said Jibran Qureishi, an economist at CfC Stanbic Bank.

The purchasing manager’s index tracks the perception of businesses on the current conditions.

The rates of expansion in output and new business were the slowest last month since the bank started tracking market data.

Activity rose only modestly, Mr Qureishi reports, with data pointing to a sharp easing in new-order growth.

New business gains were reportedly undermined by a number of factors including the currency weakness and teachers’ strikes.

The findings are however in contrast with another study done by economists and the Standard Chartered Bank. While Qureishi said that the businesses were bearish in September, Sarah Baynton-Glen of Stanchart Africa said the market conditions were actually looking up.

Demand indicators

Strong domestic demand has helped the Kenyan economy rebound in September, according to Standard Chartered. Kenyan businesses reported increased production last month to meet an improvement in the demand indicators, helping make up for sluggish exports.

Rising customer orders in various sectors included in the survey have reversed the negative sentiments among business proprietors in August.

“Kenyan firms have also reported increasing production in response, and employment reached a four-month high as firms reported increasing the size of their work forces.

Interestingly, Stanchart said the size of export orders had dropped by a third in September alone. Qureishi reports that 83 per cent of the respondents in the CFC Stanbic survey said there was no change in the size of their workforce.