Local businesses register improvement after easing of COVID-19 restrictions in July

Local businesses marked a significant improvement in activity/output levels last month from a further ease to restrictions including inter-County travel.

Kenya’s Purchasing Managers Index (PMI) tracked by Stanbic Bank/IHS Markit marked its first positive change in seven months to rise on the right side of the 50 points threshold to 54.2 from 46.6 points in June.

The rebound which saw a renewal in the economic conditions coincided with the end of inter-County cessation with President Uhuru Kenyatta lifting movement in and out of the Counties of Mombasa, Nairobi and Mandera on July 6.

“Notably the removal of county travel restrictions supported output and business sentiment in July. This enabled firms to receive inputs much quicker, as supplier delivery times improved,” noted Stanbic Bank regional economist for East Africa Jibran Qureishi.

New orders grew positively for the first time since January as customer footfall grew marking a rebound in effective demand.

At the same time new export orders remained on the rise with demand for local goods in Europe increasing in the period.

Similarly, the business marked a steep rise in sales with output levels following suit expanding at their fastest pace since May 2018.

“Firms indicated that the lifting of COVID-19 related restrictions helped to generate higher sales in July, most notably from the removal of regional border controls,” noted the survey.

Purchasing activity by firms stood at a seven month high as businesses stocked up on inputs in anticipation of a return to normal levels of demand.

Purchase prices however rose from a shortage of raw materials causing companies to raise their output charges for the first-time since March.

Moreover, the employment index continued to mark declines or the fifth straight month as firms continued to shed jobs.

The trend in job losses may however shift as firms now tell of stretched capacities to meet customer orders.

In spite of the marked rebound, local businesses have remained pragmatic expressing caution on any expansion plans as they tie them up to the end of the pandemic.

As a result, the future outlook index remains at its lowest since August 2016 when optimism was on the floor.