One month after Coronavirus, Kenya private sector is in recession

The economy has been here before, even worse in October 2017 according to Stanbic Bank Kenya PMI index. While the election slowdown lasted a month and rebounded from 34 to a positive growth above 50 points, no one knows how long the current slump will last.

PMI readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show a deterioration.

In March this year, the headline PMI posted at 37.5, down from 49.0 in February after people were put in temporary lockdown and businesses anticipated sharp decline in footfall ending up firing people and closing shop.

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The Coronavirus pandemic first hit export businesses as new orders from Europe were canceled. Kenya exports horticultural produce to Europe especially flowers, fruits, and vegetables.

As a result of canceled orders, many workers were laid off with Business Daily reporting that out of the 150,000 flowers workforce: about 30,000 casual workers have been axed while over 40,000 permanent staff have been asked to go home on indefinite leave with the industry player warning that had count could drop to 20,000 in the next few weeks.

PMI index shows that employment was lowered for the first time in 11 months.

Inventory has also declined since companies do not expect a rebound of demand soon as consumers burn through their savings, incomes run out and government tightens limits on movement to contain the spread of the virus.

China was on lockdown in February and this disrupted flow of inputs causing prices to shoot up. However since new orders were not being made, the delivery times improved.

This is a good indication especially since China is coming back online and is aggressively pushing to reopen disrupted supply lines and may capture market share in a big way in the coming months.

Stanbic says some firms raised prices to counteract falling sales revenues, but others reduced prices in an effort to revive consumer demand.

Prices have become a hot topic with the government keen on keeping inflation in check warning firms that increase prices. The government has not imposed price controls but such a scenario is not unprecedented.

Looking ahead, the overall level of sentiment in the Kenyan private sector remained strong, despite the impact of the pandemic.

Companies cited plans to widen products and services and open new branches, though some respondents noted these plans were on hold until after the virus has been brought under control.

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