Kenyan business activity fell sharply in June amid reports of widespread economic challenges and a negative impact on sales from protests and policy uncertainty.
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 rate of inflation was mild and had little impact on selling charges. The survey was conducted between June 12th and 26th and so the majority of responses were received before the unrest on the 25th.
The headline figure derived from the survey is the Purchasing Managers’ IndexTM (PMI®). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
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. 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. According to panel members, tough economic conditions brought on by the cost-of-living crisis, as well as protests surrounding the country’s 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 of inputs. 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.
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