NAIROBI, Kenya, Apr 8 – Kenyan firms saw a decline in economic activities in March with only a marginal improvement reported in the health sector, a survey of purchasing managers by Stanbic Bank has revealed.
Stanbic’s PMI output index issued on April 7, 2021, turned negative dropping to 50.6 points in March compared to 50.9 in February, the weakest seen since the recovery in economic conditions from the initial impact of the coronavirus pandemic began last July.
The decline, the report says signaled a slowing in both activity and demand growth in March.
“The Kenya PMI dropped to its lowest for nine months in March, as private sector companies reported only a marginal expansion in output and a slowdown in new order growth as cash flow issues limited customer spending,” the report indicates.
In the period under review, businesses highlighted that cash flow problems linked to the COVID-19 pandemic meant that households often limited spending to essential items.
As a result, sales grew at the slowest rate since last November, with firms also seeing a loss of momentum from export orders.
Subsequently, output increased at the slowest rate for nine months.
Commenting on the report, Stanbic Bank’s Fixed Income and Currency Strategist Kuria Kamau said business activity in the period has been largely affected by the new COVID-19 strain.
“Demand growth was negatively affected by a resurgence in COVID-19 which resulted in households conserving cash and prioritizing spending to essential items. Firms’ outlook for output worsened on account of the resurgence in COVID-19 which is expected to affect demand,” said Kamau.
This saw output prices continued to rise, driven by higher input prices, and employment levels increased to clear backlogs of work.
However, private sector employment improved further in March despite the report describing the growth rate in the sector as moderate.
At the same time, increased workforce contributed to a reduction in the backlog of work which was down for the first time since November 2020.
The survey showed uncertainty in economic prospects in the next 12 months with most commercial banks expecting no change.
“ Finally, expectations for future activity slipped in March and were the third-lowest seen in the series history. Notably, only around a quarter of survey respondents expect an increase in output over the coming year, linked to new branch openings and hopes of rising customer orders. Most remaining firms, meanwhile, predict no change in output amid worries of a further impact from COVID-19 on demand,” the report reads.
