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Private sector activity slows to 15-month low on falling demand

BUSINESS
By Otiato Guguyu | March 6th 2019
A Kenyan worker wears a dust mask as she works at the Hela intimates export processing zone (EPZ) limited factory in Athi River, Nairobi. [Courtesy]

Private sector activities fell in February to a 15-month low, on the back of low consumer demand as well as a slowdown in output.

The Stanbic Purchasing Managers Index (PMI) that tracked the pulse of the private sector for February, released yesterday, showed that was the lowest since November 2017, an electioneering year.

The headline PMI fell from 53.2 in January to 51.2 in February, signaling a modest improvement in the health of Kenya's private sector economy.

“The first quarter of the year is usually associated with dry weather conditions and hence it is not surprising that the PMI is falling. This is more of a cyclical trend and as the long rains commence towards March and April, activity generally tends to recover, boosting domestic demand,” said Jibran Qureishi, regional economist East Africa at Stanbic Bank.

Some firms highlighted an increase in food and raw material charges as well as the impact of taxation on input costs.

“That said, on a positive note, new export orders remained robust in February, courtesy of the Valentine’s Day flower sales to Europe. This subsequently lent support to the Kenya shilling,” said Mr Qureishi.

Stanbic said those polled in the survey indicated that companies lacked sufficient money to spur the productive sectors of the economy.

“Some panelists are reducing output due to cash flow problems and unfavourable weather conditions,” said Stanbic.

Citi Bank predicted that the country would struggle to improve growth beyond the average five to six per cent level, unless there was a substantial increase in agriculture and manufacturing and continued shilling stability.

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