Kenya’s private sector activity fell in June, due to slowing business in services, wholesale, and retail sectors.
High inflation and weak consumer spending power contributed to the tough trading conditions, according to a survey by Stanbic Bank Kenya.
The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) fell to 47.8 in June from 49.4 a month earlier, marking the fifth month in a row that the PMI has stayed below 50, signalling a contraction in activity.
Inflation in Kenya eased to 7.9% year-on-year in June from 8.0% a month earlier, while the shilling has hit repeated record lows since late 2021.
On the positive side, the weaker shilling provided a reprieve for exporters, with new export business remaining in expansionary territory for the fourth consecutive month.
“In the medium term, growth could be robust, but most of the Finance Bill 2023’s proposals (which could raise both the cost of doing business and the cost of living) could stifle growth in private investment and consumption, which would weigh on the economy,” Mulalo Madula, an economist at Stanbic Bank, said.
“Notably, firms have an improved outlook for the next 12 months, albeit remaining below average.”
The cost of credit is expected to remain high in the short to medium term due to rising interest rates.
This follows the hike in the Central Bank Rate by 100.0 bps to 10.5% in June 2023 from 9.50% in May 2023. As a result, activities in the private sector are expected to be stifled.