Protests fuel Kenya's July’s economic downturn
Private sector experienced the sharpest decline in activity in a year as civil strife, weak orders, and rising input prices hit hard in July
Players in Kenya's private sector experienced the sharpest decline in activity in a year as civil strife, weak orders, and rising input prices hit hard in July.
While input purchases dipped across industries, the Stanbic Bank Kenya PMI survey for the month in focus shows staffing levels held steady during the period.
Related
Explainer: What Kenya losses in a single day of economic shutdown
At 46.8, down from 48.6 in June, the index signalled a solid downturn in the health of private sector for East Africa's largest economy. Statistics show that July was the third consecutive month with the health of the economy on the decline, further below the 50.0 neutral threshold.
"It also reflected harsh economic conditions crimping consumer spending, more so in services and manufacturing. Positively, there were expansions in agriculture, construction and wholesale and retail, but it was not sufficient," said Christopher Legilisho, Economist at Stanbic Bank Kenya.
According to the survey, 38 percent of survey respondents said they experienced activity downturn over the month with manufacturing and services sectors reporting the biggest dip.
Other industries that reported reduced activity were construction, wholesale and retail. In particular, "businesses reportedly curbed their output because of lower sales volumes, cash flow problems, political unrest and accelerating inflationary pressures," the report explains.
"Positively, there were expansions in agriculture, construction and wholesale and retail, but it was not sufficient to lift overall economic output. Employment conditions were stable, notwithstanding the dip in output. Business confidence in future output increased for a second month in a row, indicating that firms anticipate will be in a better state a year from now," noted Legilisho.
He added: “Pricing pressures increased due to a rise in fuel prices by the Energy and Petroleum Regulatory Authority (EPRA) in July. Firms also complained that higher taxes contributed to an increase in purchase and operating costs."
What's more, private sector reported that total new orders also decreased during July, recording the sharpest rate for 12 months. According to survey participants, orders fell due to reduced customer spending power, higher prices and political protests leading to lower footfall.
