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Businesses in 38-month production low tied to drought

Kenyan businesses experienced their hardest time in 38 months last month, grinding to a near-halt, according to a Stanbic Bank survey.

The bank’s HIS Markit Purchasing Manager’s Index posted its lowest reading since January 2014, the latest Purchasing Manager Index signalling harder times for consumers and businesses.

Stanbic Bank regional economist Jibran Qureishi said the index reading was the lowest seen in 38 months of data collection due to drought.

“As we pointed out in our previous report, the ongoing drought and decline in private sector credit access will inevitably lead to deterioration in business conditions within the Kenyan private sector. This month’s historic low reading is symptomatic of these risks that we are flagging,” said Mr Qureishi.

Long rains

“In addition, potentially higher input costs over the coming months could also hinder the private sector’s progress. More importantly, the long rains season beginning in March will be pivotal for the agricultural sector, and in the event that the rains are inadequate we may potentially see an entrenched slowdown within the business operating environment,” he said.

Output declined for the first time since the inception of the survey in January 2014, pulling down the PMI index driven by fewer-than-expected sales and cash shortages among clients.

Fewer businesses were opened, pulling down growth to a 17-month low even though new export business grew stronger in February due to increased international demand and expansion into new export markets. 

Kenya’s overall inflation rate stood at 9.04 per cent in February, bursting the ceiling of 7.5 per cent set by the government and the highest recorded since June 2012.

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