Relaxed curfews lift private sector activity in June


Relaxed curfews lift private sector activity in June
Productivity inside a local plant PHOTO | CITIZEN DIGITAL

In Summary

  • Data from the monthly publish Stanbic Bank/IHS Markit Purchasing Managers Index revealed a significant surge in activity as the headline PMI rose to 46.6 points in June from 36.7 points in May.
  • Job numbers however continued to drop albeit at the lowest pace since March even as firms further cut wages leading to the first ever back to back decline of input costs.
  • Companies continue to note pessimism in growth expectations as the future output index marked a successive drop, weakening to its lowest since August 2016 with only 37 percent of respondents’ seeing an improvement in activity over the next 12 months.

The relaxation of restriction measures including an ease to set curfew hours saw a lift in private sector activity across June as both demand and sales rebounded from sharp declines in May.

Data from the monthly publish Stanbic Bank/IHS Markit Purchasing Managers Index revealed a significant surge in activity as the headline PMI rose to 46.6 points in June from 36.7 points in May.

This is as the relaxed measures marked an increase in output inside private sector firms along with rebounding consumer demand.

“Output and new orders fell at considerably slower rates in June as the reduction in curfew hours helped many businesses to increase operating hours and re-open premises,” noted the monthly survey.

“Relaxed measures in Europe meanwhile led to a slight improvement in export demand that was the first since February.”

The rebounding sales improved company cashflows enabling them to purchase more inputs.

Job numbers however continued to drop albeit at the lowest pace since March even as firms further cut wages leading to the first ever back to back decline of input costs.

The private sector firms marked a steady rise in work backlogs owing to continued disruptions including working from home policies.

Firms however increase their delivery times as they faced tougher peer competition and lower demand for services.

Purchase prices in June were higher than those recorded in May due to the weaker availability of some goods including fuel, medical products and cereals.

Consumers meanwhile continued to enjoy lower purchasing costs as output prices fell at their second sharpest rate in the series history as firms lowered charges in an effort to attract more clients and cushion existing customers.

Companies however continued to note pessimism in future growth expectations as the future output index marked a successive drop, weakening to its lowest since August 2016 with only 37 percent of respondents’ seeing an improvement in activity over the next 12 months.

“Private sector activity fell at a slower rate in June, albeit from a marked level in April. A resumption in cargo flights in addition to the gradual re-opening of economies around the world, is underpinning external demand,” noted Stanbic Bank Regional Economist Jibran Qureishi.

“However, the damage done by Covid-19 could last for the better part of the next 6 months, notwithstanding what official growth statistics may indicate. The impact from the loss of jobs and subsequent decline in consumption will probably be felt for a while.”

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Story By Kepha Muiruri
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