Businesses feel the heat amid economic slowdown, protests

Kenyan business activity fell sharply in June amid widespread economic challenges and a ="https://www.standardmedia.co.ke/article/2001498254/mayhem-in-the-streets-as-gangs-infiltrate-demos-steal-and-burn">negative impact on sales from protests< and policy uncertainty following the fall of the Finance Bill, 2024.  

According to the Stanbic Purchasing Managers Index (PMI), new business intakes dropped at the fastest rate since November last year, leading to a drop in business confidence and weaker job creation.  

“Although Kenyan firms also saw a renewed increase in their input costs in June, the ="https://www.standardmedia.co.ke/business/testbed/article/2001498079/report-cost-of-living-drops-by-05-per-cent-in-june">rate of inflation was mild< and had little impact on selling charges,” said Stanbic yesterday on the survey findings. The survey, conducted between June 12 and 26, noted that the majority of responses were received before the unrest on June 25.  

The headline PMI fell below the 50.0 neutral mark to 47.2 in June, signalling a solid deterioration in the health of the Kenyan private sector economy.  

Stanbic said the decline was the sharpest recorded in seven months, which contrasted notably with the PMI’s 16-month high of 51.8 in May.  

“After registering a solid expansion midway through the quarter, private sector output dropped markedly in June, in line with a renewed and steep fall in new business intakes,” it says.  

According to panel members, tough economic conditions brought on by the cost-of-living crisis as well as protests surrounding the ="https://www.standardmedia.co.ke/article/2001498030/500-goons-were-hired-to-cause-violence-during-gen-z-demos-leaders-claim">Finance Bill< hurt sales volumes.

The downturn was partially softened by a rise in new orders across manufacturing, which was the only monitored sector to register growth in June. The drop in sales tempered efforts to expand capacity at Kenyan companies in June. Purchasing activity decreased for the first time in three months, leading to a fresh reduction in firms’ inventories.  

However, the pace of stock depletion was only modest.

Employment numbers continued to rise, but the increase was the weakest seen in the year-to-date. Greater availability of raw materials and competition between vendors led to a further improvement in supplier performance during June.

“That said, the reduction in delivery times was the least marked since February. Input prices in the Kenyan economy rose for the first time in three months in June, following a near-record decrease in the previous survey period. Higher taxation on products was commonly noted by respondents as driving up costs, offsetting further reports of reduced fuel prices and a positive impact on import prices from stronger exchange rates,” said Stanbic in a statement.