Private Sector Confidence Drops to 16 Months Low on Polls Anxiety

Kenya’s private sector business confidence has dropped to a 16-month low as firms reduced their output and new orders on account of August polls.

This is according to the latest Markit Stanbic Bank Kenya Purchasing Managers’ Index that reveals that in August there was a renewed drop in employment.

The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) remained below the 50.0 no-change mark for the fifth successive month falling to a reading of 44.2 from a reading of 46.3 in July.

Construction and manufacturing sectors registered the greatest decline according to Stanbic.

In addition, new business inflows fell at a sharp and accelerated pace, with the general election, rising inflation and cash flow challenges reportedly leading to a sustained drop in client orders.

“Businesses noted that higher prices had forced customers to rein in spending. Sales continued to decline in all five main sectors covered by the survey, with construction recording the sharpest downturn,” said Stanbic.

The election-linked disruption meant that some vendors were unable to deliver inputs, businesses made fewer purchases of inputs due to deteriorating sales, while inventories were cut for the first time since January amid efforts to avoid dead stocks.

The sustained fall in demand forced private sector companies to readjust their input purchases with the overall procurement levels falling for the fourth month running in August, declining to a level last witnessed in April last year.

The report indicates that 10 percent of respondents from private sector businesses gave a positive forecast for output over the next 12 months, amid fears that the inflation-driven downturn in the economy will continue.

“As such, the outlook was the third-worst on record behind those seen in April and May. With sales dropping and the outlook remaining weak, staff numbers were lowered for the third time in the past four months in August,” the bank added.