NAIROBI, Kenya, Apr 3 – Kenyan firms saw a much sharper decline in operating conditions in March, leading to a drop in the Purchasing Manager’s Index to 37.5, the second-worst record in the survey’s history.
The sharp deterioration in business conditions was widely caused by the outbreak of coronavirus disease 2019 (COVID-19) in the country, which led to a large drop in consumer demand and client orders.
The headline PMI, which was characterized by pandemic-related fall in sales and job numbers decline, was down from February’s 49.0. Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
During the period, businesses consequently reduced activity, as the government urged companies in the public and private sectors to work from home.
The government also ordered dusk to dawn curfew to combat the spread of the virus, which has impacted business operations.
“The sharp drop in the PMI doesn’t really come as a surprise. The negative impact from COVID-19 is quite broad-based and is likely to affect various sectors across the economy,” Jibran Qureishi, Regional Economist E.A at Stanbic Bank said.
During the period, demand for inputs was noted to fall at the quickest pace since late-2017. However, shortages of raw materials contributed to a faster rise in overall input costs.
Worst hit sectors
Overall, Qureishi, said the tourism and floriculture sector has been hit the hardest so far, admittedly due to global cross border travel restrictions and waning luxury spending in markets such as Europe.
“Sourcing raw materials from markets such as China has also been cumbersome. Yet, Chinese factories are likely to restart production as early as mid-April which may somewhat soften this negative impact. Arguably, there will be a notable impact on economic output this year as supply chains globally are disrupted and negative demand shocks are felt too. But of course, timing will be everything. The longer the duration, the more acute or severe the impact will be,” he said.