Kenyan businesses future optimism falls to 33 month-low


Nairobi City

In Summary

  • Companies kept the lowest stock holdings for both input and outputted commodities in nine months since February this year as greater advertising and customer referrals failed to uplift sales.
  • Nevertheless, the fresh data from the PMI holds shade for optimism with output levels for instance growing at their fastest since July. Further, firms increased their workforce numbers for the seventh straight month to signal expectations for sustained output levels.
  • Stanbic Regional Economist Jibran Qureishi insists on the importance of the clearance of pending bills even as he expects the private sector to count relief from the recent repeal of the interest rate cap.

Kenyan businesses optimism for future has fallen to its lowest count in 33 months to mirror caution to business activity undertaken in the coming year.

The stripped off confidence represented in November’s Stanbic Markit Purchasing Managers Index (PMI) is against the solid improvement in the health of the private sector across the month as the headline economic performance spot-rate was retained at 53.2 points from October.

Average new orders for goods and services slumped to their lowest since May in spite of some of the reviewed firms counting higher orders.

As such, companies kept the lowest stock holdings for both input and outputted commodities since February this year as greater advertising and customer referrals failed to uplift sales.

The local businesses however found relief from high export orders with the portfolio rising to its highest in 20 months with the Europe driving the bulk of new customers.

From the resulting slide in local demand, firms resolved to put up lower selling prices for a second month running with the reviewed businesses attributing the price cuts to the weighted need to attract new customers and subsequently, their market shares.

Nevertheless, the fresh data from the PMI holds shade for optimism with output levels for instance growing at their fastest since July.

Further, firms increased their workforce numbers for the seventh straight month to signal expectations for sustained output levels.

Cost inflationary pressures were meanwhile at their lowest in 27 months as input costs rose at their lowest pace since August 2017 in spite of the absorption of higher import costs and taxes on the back of the filtering in of increments to both the import declaration (IDL) and the railway development (RDL) levies under the enactment of the 2019, Finance Act.

Moreover, firms were for the first time in recent months less inflamed by accumulated pending bills from the State even as the accrued arrears persisted.

Nevertheless, Stanbic Regional Economist Jibran Qureishi insists on the importance of the bills clearance even as he expects the private sector to count relief from the recent repeal of the interest rate cap.

“Less panellists complained about cash flow issues this month. Of course, needless to say, the government should continue to clear pending arrears owed to the private sector in order to alleviate these cash flow constrains,” he said.

“The private sector will indeed be in a much better position than it currently is or has been for the last two and a half years”.

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Story By Kepha Muiruri
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