The latest survey data signalled a slight deterioration in Kenyan private sector conditions in September. The Stanbic Bank Kenya PMI® dipped below the neutral mark after recording a slight recovery in August following disruption to companies caused by protests.
Reports of economic challenges for businesses and households prompted a reduction in sales, leading to a renewed cutback in activity.
Positively, the slowdown helped ease the input price inflation rate, contributing to only a marginal rise in output prices.
The survey’s headline figure is the Purchasing Managers’ Index™ (PMI). Readings above 50.0 signal an improvement in business conditions compared to the previous month, while readings below 50.0 show a deterioration.
Kenyan private sector economy deterioration
September saw the headline PMI drop below the 50.0 no-change mark, falling to 49.7 from 50.6 in August, to indicate a slight deterioration in the health of the Kenyan private sector economy.
The decline followed the first improvement in business conditions for three months in August.
Surveyed businesses registered a slight decline in their activity levels at the end of the quarter, coinciding with a renewed drop in new business intakes.
Anecdotal evidence suggested that challenging economic conditions at clients such as reduced cash flow led to lower intakes of work placed at surveyed firms. That said, the pace of contraction was only marginal, with several panellists continuing to see sales improve amid greater customer turnout, higher investment and a positive impact from marketing.
A renewed decline in new business across the service sector coincided with sustained contractions in the agriculture and wholesale & retail segments. At the same time, manufacturers and construction firms registered higher sales.
What was Kenya firms’s purchasing activity in September 2024?
Despite lower demand on average, Kenyan firms reported an expansion in their purchasing activity for the second month running.
Survey respondents linked the move to the shoring up of stocks amid hopes that sales will strengthen. Inventories of inputs rose at a modest pace that was the quickest since May, supported by a slight reduction in average lead times.
Stable workforce numbers were also recorded in September, as firms noted there was little need to hire new staff or replace voluntary leavers. This was partly due to a softening of capacity pressures, with the survey data indicating little change in firms’ outstanding business after a recent run of accumulation.
In addition, Kenyan firms continued to show a subdued level of confidence towards future activity, with only 4% of survey members expecting an upturn over the coming year.
On prices, the September survey data provided hopeful signs of an easing in inflationary pressures at the end of the third quarter.
A softer increase in purchase prices led to the weakest uptick in total business expenses in the current four-month sequence of inflation.
The marginal rise in input costs led to a similarly mild uplift in prices charged, as companies with inflated costs generally opted to pass these on to customers.
