Nairobi — Kenya’s private‑sector activity continued to deteriorate in March as business orders fell for a second consecutive month, weighed down by rising prices and cash‑flow problems, according to the latest PMI survey. Inflationary pressures remained high, with about 30 % of surveyed firms reporting higher purchase prices due to difficulties accessing US dollars and a weakening exchange rate. The rise in costs pushed output‑price inflation to a five‑month high, while shortages of imported goods prompted companies to build safety stockpiles.
The decline in activity in March was somewhat less severe than the initial downturn in February, as businesses signalled modest improvements in employment and purchasing. Consequently, the headline figure from the Stanbic Purchasing Managers’ Index (PMI) rose to 49.2 from a six‑month low of 46.6 in February. The softer decline reflected weaker falls in both output and new orders during the month. Although many respondents still saw demand slip because of high prices and limited money in circulation, some reported a recovery in customer orders, particularly from abroad.
“Although the pace of deterioration has slowed, Kenya saw business conditions continue to decline in March, as the PMI remains just below 50. Both output and new orders fell in March, particularly in wholesale and retail trade, due to lower demand, especially as price pressures have accelerated,” said Mulalo Madula, economist at Standard Bank.
Sector data showed that the latest contractions in output and sales were concentrated in wholesale and retail companies, whereas manufacturing, agriculture, construction and services recorded expansions in both metrics. At the same time, the survey indicated renewed, albeit modest, rises in employment and purchasing in March. The increase in purchasing reflected efforts to build inventories of inputs, as firms reported that difficulties accessing US dollars had caused commodity shortages and longer delivery times.
A weakened Kenyan shilling against the US dollar further drove up purchasing costs. Around 30 % of firms saw purchase prices rise since February, with higher taxes and fuel prices also cited. Overall cost inflation remained among the highest recorded since the survey began in January 2014, prompting firms to raise their output prices at the fastest rate in five months.
While the outlook for future business activity fell to a three‑month low in March, it remained relatively strong and above the level seen throughout much of 2022. Many firms commented on plans to open new branches and increase capacity over the coming year, hopeful that demand will begin to recover.
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