In September, Kenya’s private sector saw a downturn, largely due to inflation and escalating fuel costs. These factors diminished consumer demand and led to a pessimistic outlook.
This is according to the Stanbic Bank Kenya Purchasing Managers’ Index (PMI), which fell from 50.6 in August to 47.8 in September.
A PMI above 50 signifies growth, while a score below 50 indicates contraction. Despite the promising growth in August, where the PMI exceeded 50 for the first time since January, rising from 45.5 in July to 50.6, the latest figures suggest a worrying trend for Kenya’s private sector.
“Elevated inflationary pressures and rising fuel bills acted to dampen client sales, whilst also leading to the second-fastest rise in input costs in the survey’s near-decade history,” Stanbic said.
Stanbic Bank attributed the decline to increased inflationary pressures and fuel costs, which not only dampened client sales but also resulted in the second-fastest rise in input costs in nearly a decade.
“Kenyan firms reported another marked rise in input prices in September, with the rate of inflation even accelerating to the second-highest on record,” the companies said in a statement.
“Anecdotal evidence indicated that currency weakness and higher fuel bills were mainly behind the rise. Output charges were raised sharply accordingly, albeit to a slightly lesser degree than August’s 14-month high.”
Kenyan firms reported a significant increase in input prices in September, with inflation rates reaching near-record highs. This was primarily due to currency weakness and higher fuel bills, leading to a sharp increase in output charges.
“Furthermore, rising interest rates have been weighing on consumer demand, business levels, and expectations,” Stanbic Bank economist Christopher Legilisho said.
Despite the rapid deterioration of output levels in July, there was a slight recovery in August. This recovery was often attributed to increased political stability, which boosted demand and led to higher activity levels, particularly in the services and manufacturing sectors.