Private sector activity sinks to a nine-month low in March

The expansion of Kenya’s private sector slumped to its lowest growth rate in nine months across the month of March.

This is according to the Stanbic Bank Kenya Purchasing Managers Index (PMI) published on Wednesday which cites tightening cash flows to businesses and reduced consumer demand.

The headline PMI reading during the month slacked to 50.6 points in March from a higher 50.9 points across February.

The reading shows the weakest state in the health of the private sector since the recovery in economic conditions from the initial impact of COVID-19 in July last year.

“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,” noted the PMI survey.

Firms have also marked a loss in the momentum of export orders.

Additionally, firms confronted greater input costs on the back of rising fuel prices which sent March’s inflation rate to a near year high of 5.9 per cent.

With firms incurring a rise in input purchasing costs, entities subsequently raised their output prices for a third straight month.

Nevertheless, firms still marginally raised their size of workforce’s in response to existing backlogs which have been on an accumulation trend since the phased re-opening of the economy.

Expectation on future activity however tumbled to the third-lowest rate since the establishment of the PMI series seven years ago with firms remaining weary of the impact of COVID-19 on demand.

The latest PMI release has coincided with the recent re-introduction of tough COVID-19 containment measures across five major counties in the country on March 26.

“This month’s reading indicates a marginal improvement in business activity before the new public health restrictions were announced. Demand growth was negatively affected by a resurgence in COVID-19 which resulted in households conserving cash and prioritizing spending to essential items,” said Stanbic Bank Fixed Income and Currency Strategist Kuria Kamau.

“Firms’ outlook for output worsened on account of the resurgence in COVID-19 which is expected to affect demand.”