High costs cut private sector recovery

The momentum of Kenya’s private sector growth slowed down for a second consecutive month in July as businesses came up against elevated costs.

This is according to data from the monthly published Purchasing Managers Index (PMI) by Stanbic Bank Kenya.

The headline PMI index eased to 50.6 points last month from a higher 51 points in June matching up to joint-weakest growth since conditions begun to improve following the first wave of the pandemic.

Businesses involved in the PMI survey for the month have reported weaker expansions in output, new orders, employment and purchasing.

Similarly, cost inflationary pressures hit a 16-months high after tax changes at the start of the month resulted in a rise to purchase prices.

Firms have largely held off against making new purchases in contrast to June buys, subsequent to the hike in costs.

In addition to the entry of new taxes, businesses have cited higher fuel costs and input shortages.

On the flipside, businesses raised their output charges in a quest to maintain their profit margins.

Nevertheless, business confidence improved to a five month high as the majority of businesses forecast improved output in the next 12 months.