Trade Falls in Sixth Straight Month – PMI

In July, Kenya’s private sector activity decreased for the sixth consecutive month as a result of the effects of rising prices, political unrest, and the depreciating shilling.

According to Stanbic’s monthly purchasing managers index (PMI) survey, the index dropped to 45.5 in July from 47.8 the previous month.

Since the year’s commencement, the index has remained below 50, signaling a decline in businesses.

According to Christopher Legilisho, an economist at Standard Bank, the headline PMI trajectory for July is not unexpected given the recent month’s events.

“Political protests, an increase in pump prices by approximately Sh12.61 in July, the further tightening of financial conditions as well as a further depreciation of the shilling — all of which saw the private sector deteriorating for a sixth straight month,” Legilisho said.

Legilisho stated that because Kenyan businesses are dealing with unabating input, output, and wage-price pressures, inflation will remain stubbornly high.

According to the Kenya National Bureau of Statistics’ most recent report on July’s inflation, the cost of living decreased from June’s 2.9% to July’s 7.3%.

The third-highest rate of input price inflation since the collection of data began in 2014, it was greater in July than it was in June. Only the agricultural industry, according to the survey, was in growth territory.

“Nevertheless, some positive indications spell economic resilience in the medium term. The agricultural sector rebounding has been supporting economic activity despite the construction, wholesale, and retail, as well as services sectors, slowing. Export orders remain in expansionary territory, buoyed by the weaker shilling,” Legilisho said.

Despite a significant slowdown in the growth of new export orders, Legilisho noted that private sector employment was nevertheless strong over the time period under consideration. However, managers suggested that the momentum has halted.

The measurements showed that operating circumstances had deteriorated more severely than they had in July, led by a strong and rapid decline in new business inflows after a decline in client demand as a result of the cost-of-living issue.

Kenyan companies saw a dramatic decline in output during the month of July due to fast declining total sales; when lockdown-affected dates are excluded, this was the second-worst month since 2017 for Kenyan firms. The companies reported that the weak orders led to cash flow problems, which constrained activity.