Private sector activity shrinks further in March

A customer shops for dairy products at a supermarket. FILE PHOTO | NMG

Kenya’s private sector activities shrunk further for the second month in a row in March as business activity and new orders decreased amid rising prices and cash flow problems, a new survey shows.

The Stanbic Purchasing Managers’ Index (PMI) says the headline index stood at 49.2 during the month, signalling a slight deterioration in business conditions.

But the decline rate lessened notably compared to February when the index dropped to a six-month low of 46.6.

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A PMI reading above 50 denotes an improvement in business conditions while that below 50 shows a fall.

During the month, the survey notes, inflationary pressures occasioning the deterioration remained exceedingly high, with around 30 percent of surveyed businesses reporting an uptick in purchase prices linked to problems of accessing US dollars and worsening exchange rates.

The country’s inflation, which stood at 9.2 percent in March, has since June last year breached the target range of 2.5-7.5 percent, triggering the Central Bank of Kenya’s Monetary Policy Committee to raise benchmark interest rates in efforts to curb consumer spending.

The sky-high inflation, fueled partly by the Russia-Ukraine conflict, the Covid-19 pandemic and a wobbling shilling, has seen household budgets shrink with people resorting to toning down on non-essential expenditures amid negative growth in real wages.

According to the PMI survey, the latest increase in costs sent the output price inflation in March to a five-month high, while related mentions of imported goods shortages led firms to seek safety stockpiles.

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Sector data in the survey showed that the latest contractions in output and sales were centred on wholesale and retail companies while by contrast, manufacturing, agriculture, construction and services recorded expansions in both metrics.

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