This archive report was first published on 4 December 2019.
December 4, 2019 - Kenyan businesses' optimism for the future has hit a 33-month low, according to the latest Stanbic Markit Purchasing Managers Index (PMI) released in November.
Despite a solid improvement in the health of the private sector, the headline economic performance spot-rate remained unchanged at 53.2 points from October.
However, average new orders for goods and services slumped to their lowest since May, with some firms reporting higher orders.
As a result, companies kept the lowest stock holdings for both input and output commodities since February this year, despite increased advertising and customer referrals failing to boost sales.
On a positive note, local businesses found relief from high export orders, with the portfolio rising to its highest in 20 months, driven by new customers in Europe.
With local demand declining, firms lowered their selling prices for a second consecutive month, citing the need to attract new customers and increase market shares.
However, the fresh data from the PMI holds some optimism, with output levels growing at their fastest since July.
Furthermore, firms increased their workforce numbers for the seventh straight month, signaling expectations for sustained output levels.
Cost inflationary pressures were at their lowest in 27 months, with input costs rising at their lowest pace since August 2017, despite the absorption of higher import costs and taxes.
Additionally, firms were less inflamed by accumulated pending bills from the State, even as the accrued arrears persisted.
Stanbic Regional Economist Jibran Qureishi emphasized the importance of clearing pending arrears owed to the private sector, expecting the private sector to benefit from the recent repeal of the interest rate cap.
“Less panellists complained about cash flow issues this month. The government should continue to clear pending arrears owed to the private sector to alleviate these cash flow constraints,” he said.
“The private sector will indeed be in a much better position than it currently is or has been for the last two and a half years,” he added.
