Kenya’s private sector economy suffered a hit to operating conditions in April, as activity and employment declined for the first time in 17 months in the wake of poor weather conditions and intensifying cash flow issues, the Stanbic Bank Kenya Purchasing Managers Index (PMI) report released in Nairobi on Monday has revealed.
According to the report, new orders were also broadly unchanged from March after continuous growth since the end of 2017.
Firms were thus led to reduce output prices, also for the first time in 17 months. Input prices rose at a quicker pace though, as drier than expected weather inflated commodity prices.
PMI readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
“From 51.0 in March, the headline PMI slipped below the neutral 50.0 threshold to post 49.3 in April. This marked the first time in nearly one-and-a-half years that the series has fallen into contraction territory, signalling a slight deterioration in business conditions,” added the report.
“It was also the fourth successive drop in the headline reading. Driving the deterioration at Kenyan businesses was a marginal decline in activity in April. Some companies were affected by dry weather during the normal “long rains” season, leading to a reduction in agricultural output,” the report pointed out.
In addition, many firms cited issues with money circulation in the economy which had a notable impact on activity levels.
Cash flow issues were also noted by many firms reporting falling new orders in April. As such, private sector sales were broadly unchanged from March, ending a 16-month period of growth.
New export orders were seemingly unaffected though, with latest data pointing to another sharp rise in sales from abroad.
Weakness around output and new orders led firms to reduce employment slightly in April, the first fall in job numbers since late-2017. Purchasing activity and stock levels continued to rise, albeit at a weaker pace than in March, noted the report.
The PMI is based on data compiled from a survey sampling approximately 400 private sector companies, which have been carefully selected to accurately represent the true structure of the Kenyan economy, including agriculture, mining, manufacturing, services, construction and retail.
JK/abj/APA