Sky high costs, dollar woes dampen trade in March
The trading environment in Kenya worsened in March, albeit marginally for the second month in a row with the Stanbic Purchasing Managers Index (PMI) remaining below 50 points which shows a contraction.
The March PMI report shows business conditions and new orders declined on rising costs and cash flow problems associated with a tanking shilling.
The survey shows inflationary pressures remained high with roughly 30 percent of businesses reporting an uptick in purchase prices due to biting problems associated with accessing US dollars amid the declining value of the Kenya Shilling.
The local currency has been dipping in value against major world currencies with central banks in the US, UK and other major trading partners raising interest rates to tackle inflation in their economies.
Central Bank data shows the shilling is exchanging at 132 against the US dollar while traders are accessing the greenback at over 140. The weakening of Kenya shilling against the US dollar led to a significant increase in purchasing costs for most businesses.
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“At 49.2 in March, the headline index signalled a slight deterioration in business conditions at the end of the first quarter of the year, and the second monthly contraction in a row,” PMI report reads in part. In the month, however, the rate of deterioration lessened notably from February, when the index dropped to a six-month low of 46.6.
PMI readings above 50 points imply an improvement in business conditions on the previous month, while readings below 50 indicate that the country is on a downward trend.
“Both output and new orders fell in March, particularly in wholesale and retail trade, due to lower demand, especially as price pressures have accelerated,” Mulalo Madula, an economist at Standard Bank said.
“Employment and purchases also increased slightly, while backlogs of work rose, prompted by agriculture, as some panelists noted that unfavourable weather conditions had reduced output.”
